(Signature)
    
    (Signature)Alain Lemaire
    
    Christian DubéPresident and Chief Executive Officer
    
    Vice-President and Chief Financial Officer
  1




---



##### 



.
    1
 
 
 1
    
    Chartered accountant auditor permit No. 19653 2




---



##### 



Comments by Auditors to U.S. Readers on Canada-U.S. Reporting Differences
  1
 Chartered Accountants
 
 1
    
    Chartered accountant auditor permit No. 19653 3




---



##### 



2008
    
    
    2007As at December 31, 2008 and 2007
    
    
    
    
    
    Restated
    
    
    Restated(in millions of Canadian dollars)
    
    Note
    
    
    (note 2 c))
    
    
    (note 2 c))AssetsCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    11
    
    
    
    25Accounts receivable
    
    
    
    
    
    
    657
    
    
    
    624Inventories
    
    
    6
    
    
    
    580
    
    
    
    5551,248
    
    
    
    1,204Property, plant and equipment
    
    
    7
    
    
    
    2,030
    
    
    
    1,886Intangible assets
    
    
    8a
    )
    
    
    149
    
    
    
    130Other assets
    
    
    8a
    )
    
    
    283
    
    
    
    236Goodwill
    
    
    8b
    )
    
    
    321
    
    
    
    3124,031
    
    
    
    3,768Liabilities and Shareholders EquityCurrent liabilitiesBank loans and advances
    
    
    
    
    
    
    104
    
    
    
    47Accounts payable and accrued liabilities
    
    
    
    
    
    
    586
    
    
    
    572Current portion of long-term debt
    
    
    9
    
    
    
    36
    
    
    
    4726
    
    
    
    623Long-term debt
    
    
    9
    
    
    
    1,672
    
    
    
    1,570Other liabilities
    
    
    10
    
    
    
    377
    
    
    
    3772,775
    
    
    
    2,570Commitment and Contingencies
    
    
    17Shareholders equityCapital stock
    
    
    11
    
    
    
    515
    
    
    
    517Retained earnings
    
    
    
    
    
    
    656
    
    
    
    724Accumulated other comprehensive income (loss)
    
    
    18
    
    
    
    85
    
    
    
    (43
    )1,256
    
    
    
    1,1984,031
    
    
    
    3,768
   (Signature)
    
    (Signature)Laurent Lemaire
    
    Robert ChevrierDirector
    
    Director
 4




---



##### 



For each of the years in the three-year periodended December 31, 2008(in millions of Canadian dollars)
    
    2008Retained
    
    
    Accumulated
    
    
    ShareholdersEarnings4
    
    
    other
    
    
    equityRestated
    
    
    comprehensive
    
    
    RestatedNote
    
    
    Capital stock
    
    
    (note 2 c))
    
    
    income (loss)4
    
    
    (note 2 c))BalanceBeginning of year
    
    
    
    
    
    
    517
    
    
    
    724
    
    
    
    (43
    )
    
    
    1,198Cumulative impact of accounting changes
    
    
    2a
    )
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Restated balanceBeginning of year
    
    
    
    
    
    
    517
    
    
    
    727
    
    
    
    (43
    )
    
    
    1,201Comprehensive income:Net loss for the year
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    
    
    
    
    (54
    )Change in foreign currency
translation of self-sustaining
foreign subsidiaries, net of
related hedging activities
    
    
    19b
    )
    
    
    
    
    
    
    
    
    
    
    190
    
    
    
    190Change in fair value of foreign
exchange forward contracts
designated as cash flow
hedges1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61
    )
    
    
    (61
    )Change in fair value of interest
rate swap agreements designated as
cash flow hedges2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Change in fair value of commodity
derivative financial instruments
designated as cash flow
hedges3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Comprehensive income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74Dividends
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    (16
    )Adjustment related to stock options
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Redemption of common shares
    
    
    11d
    )
    
    
    (3
    )
    
    
    (1
    )
    
    
    
    
    
    
    (4
    )BalanceEnd of year
    
    
    
    
    
    
    515
    
    
    
    656
    
    
    
    85
    
    
    
    1,256
 2007Retained
    
    
    Accumulated
    
    
    ShareholdersEarnings4
    
    
    other
    
    
    equityRestated
    
    
    comprehensive
    
    
    RestatedNote
    
    
    Capital stock
    
    
    (note 2 c))
    
    
    income (loss)4
    
    
    (note 2 c))BalanceBeginning of year
    
    
    
    
    
    
    517
    
    
    
    647
    
    
    
    (9
    )
    
    
    1,155Cumulative impact of accounting changes
    
    
    2e), j
    )
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Restated balanceBeginning of year
    
    
    
    
    
    
    517
    
    
    
    647
    
    
    
    (8
    )
    
    
    1,156Comprehensive income:Net earnings for the year
    
    
    
    
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    96Change in foreign currency
translation of self-sustaining
foreign subsidiaries, net of
related hedging activities
    
    
    19b
    )
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    (41
    )Change in fair value of foreign
exchange forward contracts
designated as cash flow
hedges1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    4Change in fair value of commodity
derivative financial instruments
designated as cash flow
hedges2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Comprehensive income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61Dividends
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    (16
    )Adjustment related to stock options
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Redemption of common shares
    
    
    11d
    )
    
    
    (2
    )
    
    
    (3
    )
    
    
    
    
    
    
    (5
    )BalanceEnd of year
    
    
    
    
    
    
    517
    
    
    
    724
    
    
    
    (43
    )
    
    
    1,198
 5




---



##### 



For each of the years in the three-year period endedDecember 31, 2008(in millions of Canadian dollars)
    
    2006Retained
    
    
    Accumulated
    
    
    Shareholdersearnings4
    
    
    other
    
    
    equityRestated
    
    
    comprehensive
    
    
    RestatedNote
    
    
    Capital stock
    
    
    (note 2 c))
    
    
    income (loss)4
    
    
    (note 2 c))BalanceBeginning of year
    
    
    
    
    
    
    264
    
    
    
    669
    
    
    
    (36
    )
    
    
    897Cumulative impact of accounting changes
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Restated balance  Beginning of year
    
    
    
    
    
    
    264
    
    
    
    666
    
    
    
    (36
    )
    
    
    894Comprehensive income:Net earnings for the year
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Change in foreign currency translation
of self-sustaining foreign
subsidiaries, net of related hedging
activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    27Comprehensive income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Dividends
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    (13
    )Net proceeds from issuance of common shares
    
    
    11d
    )
    
    
    250
    
    
    
    (7
    )
    
    
    
    
    
    
    243Adjustment related to stock options
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Redemption of common shares
    
    
    
    
    
    
    (1
    )
    
    
    (3
    )
    
    
    
    
    
    
    (4
    )BalanceEnd of year
    
    
    
    
    
    
    517
    
    
    
    647
    
    
    
    (9
    )
    
    
    1,155
 
 1.
    
    Presented net of income taxes of $25 million (2007$(2) million) and reclassification adjustments to the consolidated statement of earnings of $(2) million. The portion to be realized within the next twelve month
is $(17) million.2.
    
    Presented net of income taxes of $1.5 million (2007$- million) and reclassification adjustments to the consolidated statement of earnings of
$- million. The portion to be realized within the next twelve month is $- million.3.
    
    Presented net of income taxes of $(3) million (2007$(1) million) and reclassification adjustment to the consolidated statement of earnings of $(12) million. The portion to be realized within the next twelve month
is $(14) million.4.
    
    The sum of retained earnings and accumulated other comprehensive income (loss) amounted to $740 million as of December 31, 2008 (2007$681 million, 2006$638 million).  6




---



##### 



2008
    
    
    2007
    
    
    2006For each of the years in the three-year period ended December 31, 2008
    
    
    
    
    
    Restated
    
    
    Restated
    
    
    Restated(in millions of Canadian dollars, except per share amounts)
    
    Note
    
    
    (note 2 c))
    
    
    (note 2 c))
    
    
    (note 2 c))Sales
    
    
    
    
    
    
    4,017
    
    
    
    3,929
    
    
    
    3,278Cost of sales and expensesCost of sales (excluding depreciation and amortization)
    
    
    
    
    
    
    3,323
    
    
    
    3,201
    
    
    
    2,657Depreciation and amortization
    
    
    
    
    
    
    213
    
    
    
    207
    
    
    
    160Selling and administrative expenses
    
    
    
    
    
    
    389
    
    
    
    390
    
    
    
    304Losses (gains) on disposal and other
    
    
    12
    
    
    
    5
    
    
    
    (17
    )
    
    
    (4
    )Impairment and other restructuring costs
    
    
    13a
    )
    
    
    43
    
    
    
    9
    
    
    
    67Loss (gain) on financial instruments
    
    
    18a
    )
    
    
    28
    
    
    
    (6
    )
    
    
    (3
    )4,001
    
    
    
    3,784
    
    
    
    3,181Operating income from continuing operations
    
    
    
    
    
    
    16
    
    
    
    145
    
    
    
    97Interest expense
    
    
    
    
    
    
    102
    
    
    
    102
    
    
    
    79Foreign exchange loss (gain) on long-term debt
    
    
    
    
    
    
    24
    
    
    
    (59
    )
    
    
    (110
    )
    
    
    102
    
    
    
    18Provision for (recovery of) income taxes
    
    
    14
    
    
    
    (32
    )
    
    
    11
    
    
    
    6Share of results of significantly influenced companies and dilution gain
    
    
    8a
    )
    
    
    (8
    )
    
    
    (27
    )
    
    
    (8
    )Non-controlling interest
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    Net earnings (loss) from continuing operations
    
    
    
    
    
    
    (72
    )
    
    
    115
    
    
    
    20Net earnings (loss) from discontinued operations
    
    
    4
    
    
    
    18
    
    
    
    (19
    )
    
    
    (16
    )Net earnings (loss) for the year
    
    
    
    
    
    
    (54
    )
    
    
    96
    
    
    
    4Basic net earnings (loss) from continuing operations per common share
    
    
    
    
    
    
    (0.73
    )
    
    
    1.16
    
    
    
    0.25Basic and diluted net earnings (loss) per common share
    
    
    11e
    )
    
    
    (0.55
    )
    
    
    0.96
    
    
    
    0.05Weighted average number of common shares outstanding during the year
    
    
    
    
    
    
    98,804,536
    
    
    
    99,329,472
    
    
    
    80,941,603
  7




---



##### 



2008
    
    
    2007
    
    
    2006For each of the years in the three-year period ended December 31, 2008
    
    
    
    
    
    Restated
    
    
    Restated
    
    
    Restated(in millions of Canadian dollars)
    
    Note
    
    
    (note 2 c))
    
    
    (note 2 c))
    
    
    (note 2 c))Operating activities from continuing operationsNet earnings (loss) for the year
    
    
    
    
    
    
    (54
    )
    
    
    96
    
    
    
    4Net earnings (loss) from discontinued operations
    
    
    
    
    
    
    (18
    )
    
    
    19
    
    
    
    16Net earnings (loss) from continuing operations
    
    
    
    
    
    
    (72
    )
    
    
    115
    
    
    
    20Adjustments forDepreciation and amortization
    
    
    
    
    
    
    213
    
    
    
    207
    
    
    
    160Losses (gains) on disposal and other
    
    
    
    
    
    
    5
    
    
    
    (29
    )
    
    
    (4
    )Impairment and other restructuring costs
    
    
    
    
    
    
    16
    
    
    
    3
    
    
    
    50Unrealized loss (gain) on financial instruments
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    (5
    )Foreign exchange loss (gain) on long-term debt
    
    
    
    
    
    
    24
    
    
    
    (59
    )
    
    
    Future income taxes
    
    
    
    
    
    
    (52
    )
    
    
    (22
    )
    
    
    (28
    )Share of results of significantly influenced companies and dilution gain
    
    
    
    
    
    
    (8
    )
    
    
    (27
    )
    
    
    (8
    )Non-controlling interest
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    Others
    
    
    
    
    
    
    (11
    )
    
    
    (13
    )
    
    
    (2
    )Early settlement of natural gaz contracts
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    155
    
    
    
    178
    
    
    
    183Changes in non-cash working capital components
    
    
    15a
    )
    
    
    (31
    )
    
    
    (89
    )
    
    
    35124
    
    
    
    89
    
    
    
    218Investing activities from continuing operationsPurchases of property, plant and equipment
    
    
    
    
    
    
    (184
    )
    
    
    (167
    )
    
    
    (110
    )Proceeds from disposal of property, plant and equipment
    
    
    
    
    
    
    5
    
    
    
    7
    
    
    
    Decrease (increase) in other assets
    
    
    
    
    
    
    (4
    )
    
    
    (3
    )
    
    
    (10
    )Cash of a joint venture and business acquisitions
    
    
    5a), b), 21a
    )
    
    
    5
    
    
    
    (10
    )
    
    
    (572
    )Business disposals, net of cash disposed
    
    
    5c), d), e
    )
    
    
    
    
    
    
    37
    
    
    
    8(178
    )
    
    
    (136
    )
    
    
    (684
    )Financing activities from continuing operationsBank loans and advances
    
    
    
    
    
    
    20
    
    
    
    7
    
    
    
    (4
    )Change in revolving credit facilities
    
    
    
    
    
    
    (149
    )
    
    
    100
    
    
    
    186Increase in other long-term debt
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Payments of other long-term debt
    
    
    
    
    
    
    (7
    )
    
    
    (8
    )
    
    
    (9
    )Early settlement of foreign exchange contracts
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    Net proceeds from issuances of common shares
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    242Dividend paid to a non-controlling interest
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    Redemption of common shares
    
    
    11d
    )
    
    
    (4
    )
    
    
    (5
    )
    
    
    (4
    )Dividends
    
    
    
    
    
    
    (16
    )
    
    
    (16
    )
    
    
    (13
    )(9
    )
    
    
    79
    
    
    
    400Change in cash and cash equivalents during the year from continuing
operations
    
    
    
    
    
    
    (63
    )
    
    
    32
    
    
    
    (66
    )Change in cash and cash equivalents from discontinued operations, including
proceeds on disposal
    
    
    4
    
    
    
    50
    
    
    
    (40
    )
    
    
    56Net change in cash and cash equivalents during the year
    
    
    
    
    
    
    (13
    )
    
    
    (8
    )
    
    
    (10
    )Translation adjustments on cash and cash equivalents
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    1Cash and cash equivalentsBeginning of year
    
    
    
    
    
    
    25
    
    
    
    34
    
    
    
    43Cash and cash equivalentsEnd of year
    
    
    
    
    
    
    11
    
    
    
    25
    
    
    
    34
  8




---



##### 



SALESFor each of the years in the three-year period ended December 31, 2008(in millions of Canadian dollars)
    
    2008
    
    
    2007
    
    
    2006Packaging productsBoxboardManufacturing
    
    
    743
    
    
    
    780
    
    
    
    727Converting
    
    
    677
    
    
    
    691
    
    
    
    790Intersegment sales
    
    
    (97
    )
    
    
    (128
    )
    
    
    (158
    )1,323
    
    
    
    1,343
    
    
    
    1,359Containerboard1Manufacturing
    
    
    615
    
    
    
    599
    
    
    
    333Converting
    
    
    962
    
    
    
    984
    
    
    
    506Intersegment sales
    
    
    (374
    )
    
    
    (390
    )
    
    
    (239
    )1,203
    
    
    
    1,193
    
    
    
    600Specialty productsManufacturing
    
    
    315
    
    
    
    318
    
    
    
    333Converting
    
    
    267
    
    
    
    232
    
    
    
    226Recovery and deinked pulp
    
    
    376
    
    
    
    374
    
    
    
    184Intersegment sales
    
    
    (98
    )
    
    
    (90
    )
    
    
    (52
    )860
    
    
    
    834
    
    
    
    691Intersegment sales
    
    
    (100
    )
    
    
    (108
    )
    
    
    (68
    )3,286
    
    
    
    3,262
    
    
    
    2,582Tissue papersManufacturing and converting
    
    
    787
    
    
    
    713
    
    
    
    727Intersegment sales
    
    
    (56
    )
    
    
    (46
    )
    
    
    (31
    )Total
    
    
    4,017
    
    
    
    3,929
    
    
    
    3,278
 
 1.
    
    In 2006, the Companys containerboard segment consists of 50% of Norampacs sales. 9




---



##### 



OPERATING INCOME (LOSS) BEFORE DEPRECIATIONAND AMORTIZATION FROM CONTINUING OPERATIONS2008
    
    
    2007
    
    
    2006For each of the years in the three-year period ended December 31, 2008
    
    Restated
    
    
    Restated
    
    
    Restated(in millions of Canadian dollars)
    
    (note 2 c))
    
    
    (note 2 c))
    
    
    (note 2 c))Packaging productsBoxboardManufacturing
    
    
    (40
    )
    
    
    (3
    )
    
    
    1Converting
    
    
    50
    
    
    
    76
    
    
    
    62Others
    
    
    (13
    )
    
    
    (4
    )
    
    
    (6
    )(3
    )
    
    
    69
    
    
    
    57Containerboard1Manufacturing
    
    
    57
    
    
    
    59
    
    
    
    (8
    )Converting
    
    
    53
    
    
    
    76
    
    
    
    45Others
    
    
    (7
    )
    
    
    17
    
    
    
    7103
    
    
    
    152
    
    
    
    44Specialty productsManufacturing
    
    
    10
    
    
    
    6
    
    
    
    1Converting
    
    
    30
    
    
    
    26
    
    
    
    30Recovery and deinked pulp
    
    
    24
    
    
    
    25
    
    
    
    9Others
    
    
    
    
    
    
    2
    
    
    
    564
    
    
    
    59
    
    
    
    45164
    
    
    
    280
    
    
    
    146Tissue papersManufacturing and converting
    
    
    89
    
    
    
    66
    
    
    
    116Corporate
    
    
    (24
    )
    
    
    6
    
    
    
    (5
    )Operating income before depreciation and amortization from continuing operations
    
    
    229
    
    
    
    352
    
    
    
    257Depreciation and amortizationBoxboard
    
    
    (72
    )
    
    
    (67
    )
    
    
    (66
    )Containerboard1
    
    
    (63
    )
    
    
    (68
    )
    
    
    (38
    )Specialty products
    
    
    (33
    )
    
    
    (31
    )
    
    
    (28
    )Tissue papers
    
    
    (35
    )
    
    
    (35
    )
    
    
    (36
    )Corporate and eliminations
    
    
    (10
    )
    
    
    (6
    )
    
    
    8(213
    )
    
    
    (207
    )
    
    
    (160
    )Operating income from continuing operations
    
    
    16
    
    
    
    145
    
    
    
    97
 
 1.
    
    In 2006, the Companys containerboard segment consists of 50% of operating income (loss) before depreciation and amortization from continuing operations of Norampac. 10




---



##### 



PURCHASES OF PROPERTY, PLANT AND EQUIPMENT2008For each of the years in the three-year period ended December 31, 2008
    
    Restated(in millions of Canadian dollars)
    
    (note 2 c))
    
    
    2007
    
    
    2006Packaging productsBoxboardManufacturing
    
    
    21
    
    
    
    23
    
    
    
    10Converting
    
    
    36
    
    
    
    36
    
    
    
    2457
    
    
    
    59
    
    
    
    34Containerboard1Manufacturing
    
    
    17
    
    
    
    16
    
    
    
    13Converting
    
    
    21
    
    
    
    14
    
    
    
    1038
    
    
    
    30
    
    
    
    23Specialty productsManufacturing
    
    
    9
    
    
    
    9
    
    
    
    10Converting
    
    
    4
    
    
    
    10
    
    
    
    6Recovery, deinked pulp and others
    
    
    28
    
    
    
    7
    
    
    
    541
    
    
    
    26
    
    
    
    21136
    
    
    
    115
    
    
    
    78Tissue papersManufacturing and converting
    
    
    37
    
    
    
    52
    
    
    
    27Corporate
    
    
    8
    
    
    
    7
    
    
    
    3Total
    
    
    181
    
    
    
    174
    
    
    
    108Purchases of property, plant and equipment included in accounts payableBeginning of year
    
    
    17
    
    
    
    10
    
    
    
    12End of year
    
    
    (14
    )
    
    
    (17
    )
    
    
    (10
    )Total investing activities
    
    
    184
    
    
    
    167
    
    
    
    110
 
 1.
    
    In 2006, the Companys containerboard segment consists of 50% of purchase of property, plant and equipment of Norampac.  IDENTIFIABLE ASSETS2008
    
    
    2007As at December 31, 2008 and 2007
    
    Restated
    
    
    Restated(in millions of Canadian dollars)
    
    (note 2 c))
    
    
    (note 2 c))Packaging productsBoxboard
    
    
    1,123
    
    
    
    977Containerboard
    
    
    1,446
    
    
    
    1,443Specialty products
    
    
    585
    
    
    
    5883,154
    
    
    
    3,008Tissue papers
    
    
    579
    
    
    
    490Corporate
    
    
    280
    
    
    
    199Intersegment eliminations
    
    
    (142
    )
    
    
    (66
    )3,871
    
    
    
    3,631Investments1
    
    
    160
    
    
    
    137Total
    
    
    4,031
    
    
    
    3,768
 
 1.
    
    Investments included investments in significantly influenced companies, notes receivable, other investments and investment in shares held for trading. 11




---



##### 



For each of the years in the three-year period ended December 31, 2008(in millions of Canadian dollars)
    
    2008
    
    
    2007
    
    
    2006SalesOperations located in CanadaWithin Canada
    
    
    1,479
    
    
    
    1,476
    
    
    
    1,149To the United States
    
    
    552
    
    
    
    559
    
    
    
    462Offshore
    
    
    60
    
    
    
    38
    
    
    
    172,091
    
    
    
    2,073
    
    
    
    1,628Operations located in the United StatesWithin the United States
    
    
    1,260
    
    
    
    1,229
    
    
    
    1,128To Canada
    
    
    77
    
    
    
    53
    
    
    
    39Offshore
    
    
    2
    
    
    
    1
    
    
    
    21,339
    
    
    
    1,283
    
    
    
    1,169Operations located in EuropeWithin Europe
    
    
    537
    
    
    
    536
    
    
    
    447To the United States
    
    
    
    
    
    
    
    
    
    
    3To other countries
    
    
    50
    
    
    
    37
    
    
    
    31587
    
    
    
    573
    
    
    
    481Total
    
    
    4,017
    
    
    
    3,929
    
    
    
    3,2782008Restated(note 2 c))
    
    
    2007Property, plant and equipmentCanada
    
    
    1,206
    
    
    
    1,247United States
    
    
    593
    
    
    
    472Europe
    
    
    231
    
    
    
    167Total
    
    
    2,030
    
    
    
    1,8862008Restated(note 2 c))
    
    
    2007Goodwill, customer relationships and client lists and
other finite-life intangible assetsCanada
    
    
    334
    
    
    
    342United States
    
    
    113
    
    
    
    99Europe
    
    
    23
    
    
    
    1Total
    
    
    470
    
    
    
    442
 12




---



##### 



Classification of financial instruments
   Cash and cash equivalents
    
    Designated as held for tradingAccounts receivable
    
    Loans and receivablesNotes receivable
    
    Loans and receivablesOther investments
    
    Designated as available for saleInvestment in shares held for trading
    
    Designated as held for tradingBank loans and advances
    
    Other liabilitiesAccounts payable and accrued liabilities
    
    Other liabilitiesLong-term debt
    
    Other liabilitiesDerivative instruments
    
    Held for trading
 Held for trading
  Held to maturity
  13




---



##### 



Available for sale
  Loans and receivables
  Other liabilities
  Derivatives
   Embedded derivatives
  Transaction costs
  Determination of fair value
  Hedge
        14




---



##### 



15




---



##### 



Foreign currency transactions
  Foreign operations
        2008
 a) Inventories
  b) Going concern
  16




---



##### 



c) Goodwill and intangible assets
  2008
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    2006As reported
    
    
    Restated
    
    
    As reported
    
    
    Restated
    
    
    As reported
    
    
    RestatedProperty, plant and equipment
    
    
    2,037
    
    
    
    2,030
    
    
    
    1,886
    
    
    
    1,886Intangible assets
    
    
    142
    
    
    
    149
    
    
    
    130
    
    
    
    130Other assets
    
    
    283
    
    
    
    283
    
    
    
    237
    
    
    
    236Retained earnings
    
    
    656
    
    
    
    656
    
    
    
    725
    
    
    
    724
    
    
    
    649
    
    
    
    647Depreciation and amortization
    
    
    214
    
    
    
    213
    
    
    
    208
    
    
    
    207
    
    
    
    161
    
    
    
    160Net earnings (loss)
    
    
    (55
    )
    
    
    (54
    )
    
    
    95
    
    
    
    96
    
    
    
    3
    
    
    
    4Basic and diluted earnings
(loss) from continuing
operations per common share
    
    $
    (0.74
    )
    
    $
    (0.73
    )
    
    $
    1.14
    
    
    $
    1.16
    
    
    $
    0.23
    
    
    $
    0.25Basic and diluted earnings
(loss) per common share
    
    $
    (0.56
    )
    
    $
    (0.55
    )
    
    $
    0.95
    
    
    $
    0.96
    
    
    $
    0.04
    
    
    $
    0.05
 2007
 d) Comprehensive income
  e) Equity
  f) Financial InstrumentsRecognition and Measurement
  17




---



##### 



Cash and cash equivalents
    
    Designated as held for tradingAccounts receivable
    
    Loans and receivablesNotes receivable
    
    Loans and receivablesOther investments
    
    Designated as available for saleInvestment in shares held for trading
    
    Designated as held for tradingBank loans and advances
    
    Other liabilitiesAccounts payable and accrued liabilities
    
    Other liabilitiesLong-term debt
    
    Other liabilitiesDerivative instruments
    
    Held for trading
  Other assets
    
    
    (12
    )Long-term debt
    
    
    (17
    )Other liabilities
    
    
    3(14
    )Net change
    
    
    2Impact on accumulated other comprehensive income
    
    
    1Impact on retained earnings
    
    
    12
 g) Hedges
   h) Accounting changes
  i) Capital disclosures
  j) Financial InstrumentsDisclosure and Presentation
  k) Others
  18




---



##### 



l) Credit risk and the fair value of financial assets and financial liabilities
  m) Business Combinations
  n) Consolidated Financial Statements and Non-controlling Interests
  o) Accounting Changes
  p) Financial Instruments  Recognition and Measurement
  q ) Financial Instruments  Disclosures
   a) Goodwill
     19




---



##### 



b) Property, plant and equipment and intangible assets
     c) Income taxes
  20




---



##### 



Note
    
    
    2008
    
    
    2007
    
    
    2006Condensed balance sheetCurrent assets
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    44Long-term assets
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    18Current liabilities
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    22Condensed statement of earnings (loss)Sales
    
    
    
    
    
    
    8
    
    
    
    104
    
    
    
    200Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    2Operating income (loss)1
    
    
    
    
    
    
    22
    
    
    
    (20
    )
    
    
    (21
    )Interest expense
    
    
    
    
    
    
    1
    
    
    
    4
    
    
    
    4Recovery of income taxes
    
    
    
    
    
    
    3
    
    
    
    (5
    )
    
    
    (9
    )Net earnings (loss) from discontinued operations
    
    
    
    
    
    
    18
    
    
    
    (19
    )
    
    
    (16
    )Net earnings (loss) per share from discontinued operations
    
    
    
    
    
    
    0.18
    
    
    
    (0.19
    )
    
    
    (0.19
    )Condensed statement of cash flowsOperating activities
    
    
    
    
    
    
    2
    
    
    
    (36
    )
    
    
    (27
    )Investing activities
    
    
    4a
    )
    
    
    47
    
    
    
    (2
    )
    
    
    84Financing activities
    
    
    
    
    
    
    1
    
    
    
    (2
    )
    
    
    (1
    )50
    
    
    
    (40
    )
    
    
    56
 1.
    
    Operating income (loss) includes the following items:
 Note
    
    
    2008
    
    
    2007
    
    
    2006Gain on disposal assets of Greenfield S.A.S.
    
    
    4a
    )
    
    
    24
    
    
    
    
    
    
    
    Closure and restructuring costs
    
    
    4b
    )
    
    
    (1
    )
    
    
    1
    
    
    
    (2
    )Impairment of property, plant and equipment
    
    
    4b
    )
    
    
    
    
    
    
    (4
    )
    
    
    (14
    )Provision on disposal of distribution activities of Fine papers
    
    
    4c
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Legal settlement
    
    
    4d), e
    )
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Loss on disposal of Thunder Bay assets
    
    
    4f
    )
    
    
    
    
    
    
    (5
    )
    
    
    23
    
    
    
    (9
    )
    
    
    (18
    )
 a)
    
    In 2008, the Company sold its Greenfield SAS pulp mill located in France for an amount of
$41 million (28 million). This transaction resulted in a gain of $24 million before
related income taxes of $4 million. In 2008, the Company sold its assets of Scierie Lemay
sawmill for a cash consideration of $6 million and a contingent consideration of $2 million.
No gain or loss resulted from this transaction.b)
    
    In 2007, the Company recorded a gain of $6 million related to the settlement of the pension
plan of the Thunder Bay coated Fine paper mill, closed in January 2006.The Company also recorded an impairment charge of $4 million in 2007 (2006$14 million) on
property, plant and equipment and other assets, and severance and inventory writedown provisions
of $1 million (2007$5 million) related to its Scierie Lemay sawmill temporarily closed in 2006.c)
    
    On November 17, 2005, the Company announced that it had reached an agreement for the sale of
its paper merchant division known as Cascades Resources, the Fine papers distribution
activities, to Coast Paper Limited, a subsidiary of PaperlinX Limited. In 2005, the Company
recorded a loss of $9 million to bring the book value of the net assets to be sold to their
net estimated realizable value. On February 28, 2006, the Company completed the transaction
for a total consideration of $86 million subject to final closing adjustments. An additional
loss of $1 million was recorded in 2006.d)
    
    In 2003, the Company was informed that Cascades Resources was the subject of an enquiry by
the Canadian Commissioner of Competition as to whether this division and its competitors had
colluded to unduly reduce market competition among paper merchants in Canada. On January 9,
2006, the Company entered a guilty plea in Ontario Superior Court relating to sales of
carbonless sheet paper in Ontario and Québec. Pursuant to the plea, the Company has agreed to
pay a total of $12.5 million in equal installments over a period of six and a half years. In
2005, a loss of $10 million was recorded in earnings representing the discounted amount of the
liability which is presented as Other liabilities in the balance sheet.e)
    
    In 2007, the Company recorded a provision of $1 million related to the settlement of the
class actions filed following the infraction described in (d) above.f)
    
    In 2007, the Company sold its coated Fine paper mill located in Thunder Bay, Ontario, which
resulted in a disbursement of $5 million.
 21




---



##### 



a) 2007 Acquisitions
   b) 2006 Acquisitions
     2007Acquired company
    
    HPM
    
    
    NorampacSpecialtyBusiness segment
    
    products
    
    
    Containerboard
    
    
    TotalAccounts receivable
    
    
    1
    
    
    
    
    
    
    
    1Inventories
    
    
    1
    
    
    
    
    
    
    
    1Property, plant and equipment
    
    
    2
    
    
    
    (57
    )
    
    
    (55
    )Customer relationships and client lists
    
    
    5
    
    
    
    45
    
    
    
    50Goodwill
    
    
    2
    
    
    
    14
    
    
    
    1611
    
    
    
    2
    
    
    
    13Accounts payable and accrued liabilities
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Other liabilities
    
    
    
    
    
    
    2
    
    
    
    2Non-controlling interest
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )11
    
    
    
    
    
    
    
    11Less: Balance of purchase price
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Total consideration paid
    
    
    10
    
    
    
    
    
    
    
    10
 2006Acquired company
    
    Simkins
    
    
    Caraustar
    
    
    SPB
    
    
    NorampacBusiness segment
    
    Boxboard
    
    
    Boxboard
    
    
    Containerboard
    
    
    Containerboard
    
    
    TotalCash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18Accounts receivable
    
    
    
    
    
    
    7
    
    
    
    (2
    )
    
    
    111
    
    
    
    116Inventories
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    75
    
    
    
    79Property, plant and equipment
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    583
    
    
    
    601Other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    13Customer relationships and client lists
    
    
    11
    
    
    
    
    
    
    
    4
    
    
    
    24
    
    
    
    39Goodwill
    
    
    7
    
    
    
    
    
    
    
    (7
    )
    
    
    187
    
    
    
    18718
    
    
    
    29
    
    
    
    (5
    )
    
    
    1,011
    
    
    
    1,053Bank loans and advances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Accounts payable and accrued liabilities
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (92
    )
    
    
    (98
    )Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (182
    )
    
    
    (182
    )Other liabilities
    
    
    (4
    )
    
    
    (5
    )
    
    
    2
    
    
    
    (155
    )
    
    
    (162
    )Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    (19
    )Total consideration paid
    
    
    14
    
    
    
    18
    
    
    
    (3
    )
    
    
    561
    
    
    
    590
 22




---



##### 



c) 2008 Disposals
 
 SpecialtyBoxboard
    
    
    Products(Discontinued
    
    
    (DiscontinuedBusiness segment
    
    operations)
    
    
    operations)Accounts receivable
    
    
    
    
    
    
    18Inventories
    
    
    
    
    
    
    9Property, plant and equipment
    
    
    
    
    
    
    5Other assets
    
    
    8
    
    
    
    48
    
    
    
    36Accounts payable and accrued liabilities
    
    
    
    
    
    
    (15
    )8
    
    
    
    21Balance of sale price-notes receivable
    
    
    (2
    )
    
    
    Gain on disposal, net of related income taxes
    
    
    
    
    
    
    20Total consideration received
    
    
    6
    
    
    
    41
 d) 2007 Disposals
  Business segment
    
    BoxboardAccounts receivable
    
    
    2Inventories
    
    
    4Property, plant and equipment
    
    
    2Goodwill
    
    
    614Accounts payable and accrued liabilities
    
    
    (2
    )12Gain on disposal
    
    
    25Total consideration received, net of cash disposed
    
    
    37
 e) 2006 Disposals
    Specialtyproducts(DiscontinuedBusiness segment
    
    operations)
    
    
    BoxboardAccounts receivable
    
    
    56
    
    
    
    4Inventories
    
    
    49
    
    
    
    3Property, plant and equipment
    
    
    5
    
    
    
    4110
    
    
    
    11Accounts payable and accrued liabilities
    
    
    (23
    )
    
    
    (3
    )Long-term debt
    
    
    
    
    
    
    (2
    )87
    
    
    
    6Purchase price adjustment and gain on disposal
    
    
    (1
    )
    
    
    4Balance of sale pricereceivables and other assets
    
    
    
    
    
    
    (2
    )Total consideration received, net of cash disposed
    
    
    86
    
    
    
    8
 23




---



##### 



2008
    
    
    2007Finished goods
    
    
    261
    
    
    
    257Raw materials
    
    
    150
    
    
    
    125Supplies
    
    
    169
    
    
    
    173580
    
    
    
    555
    2008Restated(note 2 c))AccumulatedCost
    
    
    depreciation
    
    
    NetLands
    
    
    87
    
    
    
    
    
    
    
    87Buildings
    
    
    538
    
    
    
    170
    
    
    
    368Machinery and equipment
    
    
    2,740
    
    
    
    1,380
    
    
    
    1,360Automotive equipment
    
    
    66
    
    
    
    48
    
    
    
    18Spare parts
    
    
    9
    
    
    
    2
    
    
    
    7Others
    
    
    385
    
    
    
    195
    
    
    
    1903,825
    
    
    
    1,795
    
    
    
    2,030
 2007AccumulatedCost
    
    
    depreciation
    
    
    NetLands
    
    
    81
    
    
    
    
    
    
    
    81Buildings
    
    
    517
    
    
    
    176
    
    
    
    341Machinery and equipment
    
    
    2,708
    
    
    
    1,412
    
    
    
    1,296Automotive equipment
    
    
    65
    
    
    
    48
    
    
    
    17Spare parts
    
    
    3
    
    
    
    
    
    
    
    3Others
    
    
    297
    
    
    
    149
    
    
    
    1483,671
    
    
    
    1,785
    
    
    
    1,886
   24




---



##### 



2008Restated(note 2 c))
    
    
    
    
    
    
    
    
    
    
    2007Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedCost
    
    
    amortization
    
    
    Net
    
    
    Cost
    
    
    amortization
    
    
    NetIntangible assetsCustomer relationship and client lists
    
    
    162
    
    
    
    26
    
    
    
    136
    
    
    
    131
    
    
    
    15
    
    
    
    116Other finite-life intangible assets
    
    
    16
    
    
    
    3
    
    
    
    13
    
    
    
    18
    
    
    
    4
    
    
    
    14178
    
    
    
    29
    
    
    
    149
    
    
    
    149
    
    
    
    19
    
    
    
    130
 2007RestatedNote
    
    
    2008
    
    
    (note 2 c))Investments in significantly influenced companies1
    
    
    
    
    
    
    147
    
    
    
    119Notes receivable
    
    
    
    
    
    
    8
    
    
    
    7Other investments
    
    
    
    
    
    
    3
    
    
    
    11Investment in shares held for trading2
    
    
    
    
    
    
    2
    
    
    
    1Deferred charges3
    
    
    
    
    
    
    14
    
    
    
    13Employee future benefits
    
    
    16b
    )
    
    
    97
    
    
    
    68Fair value of derivative financial assets
    
    
    
    
    
    
    13
    
    
    
    28284
    
    
    
    247Less: Current portion, included in accounts receivable
    
    
    
    
    
    
    1
    
    
    
    11Total other assets
    
    
    
    
    
    
    283
    
    
    
    236
 1.
    
    Investments in significantly influenced companies include a 34% interest in Boralex Inc. for a net book value of $121 million and a market value
of $97 million (2007$96 million and $222 million respectively). In the opinion of management, this does not represent a permanent decline in value
and as such, no provision has been taken by the Company. In 2008, the Company recorded a dilution loss of 0.4 million resulting from the decrease
of it participation for less than 0.5%. In 2007 a gain of $15 million resulting from the decrease of its participation from 43% to 34% as a result
of a public equity offering of 7.3 million common shares by Boralex at a price of $15.00 each.2.
    
    The following are the details of net changes in held for trading investments in shares:
 2008
    
    
    2007Investments at costBeginning of year
    
    
    1
    
    
    
    1Adjustment to fair value
    
    
    1
    
    
    
    2
    
    
    
    1
  2008
    
    
    
    
    
    
    
    
    
    
    2007Restated
    
    
    
    
    
    
    
    
    
    
    Restated(note 2 c))
    
    
    
    
    
    
    
    
    
    
    (note 2 c))Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedCost
    
    
    amortization
    
    
    Net
    
    
    Cost
    
    
    amortization
    
    
    NetDeferred chargesFinancing costs
    
    
    14
    
    
    
    9
    
    
    
    5
    
    
    
    13
    
    
    
    7
    
    
    
    6Other
    
    
    12
    
    
    
    3
    
    
    
    9
    
    
    
    8
    
    
    
    1
    
    
    
    736
    
    
    
    12
    
    
    
    14
    
    
    
    21
    
    
    
    8
    
    
    
    13
 25




---



##### 



2008Packaging productsSpecialtyBoxboard
    
    
    Containerboard
    
    
    products
    
    
    Sub-total
    
    
    
    Tissue papers
    
    
    TotalCarrying value of goodwillBeginning of year
    
    
    27
    
    
    
    260
    
    
    
    15
    
    
    
    302
    
    
    
    
    10
    
    
    
    312Impairment
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    (8
    )Foreign currency translation and others
    
    
    6
    
    
    
    10
    
    
    
    1
    
    
    
    17
    
    
    
    
    
    
    
    
    17Carrying value of goodwillEnd of year
    
    
    25
    
    
    
    270
    
    
    
    16
    
    
    
    311
    
    
    
    
    10
    
    
    
    321
 2007Packaging productsSpecialtyBoxboard
    
    
    Containerboard
    
    
    products
    
    
    Sub-total
    
    
    
    Tissue papers
    
    
    TotalCarrying value of goodwillBeginning of year
    
    
    36
    
    
    
    257
    
    
    
    10
    
    
    
    303
    
    
    
    
    10
    
    
    
    313Goodwill resulting from business
acquisitions and disposals
    
    
    (6
    )
    
    
    11
    
    
    
    5
    
    
    
    10
    
    
    
    
    
    
    
    
    10Foreign currency translation and others
    
    
    (3
    )
    
    
    (8
    )
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    
    (11
    )Carrying value of goodwillEnd of year
    
    
    27
    
    
    
    260
    
    
    
    15
    
    
    
    302
    
    
    
    
    10
    
    
    
    312
 c)
    
    Amortization of intangible and others assets amounted to $15 million for the year ended
December 31, 2008 (2007$13 million; 2006$7 million). Amortization of financing costs is
presented in interest expense.
  Intangible assetsCustomer relationships and client lists
    
    
    16Other finite-life intangible assets
    
    
    7Deferred charges
    
    
    6Financing costs
    
    
    6Other
    
    
    5
  Years ending December 31,2009
    
    
    162010
    
    
    142011
    
    
    142012
    
    
    132013
    
    
    11
 26




---



##### 



Note
    
    
    2008
    
    
    2007Revolving credit facility, weighted average rate of 2.54% as at December 31, 2008,
maturing in 2011
    
    
    a
    )
    
    
    427
    
    
    
    553Term credit facility, bearing interest at 2.54% as at December 31, 2008, maturing in 2012
    
    
    a
    )
    
    
    100
    
    
    
    1007.25% Unsecured senior notes of US$672 million (2007US$675 million), maturing in 2013
    
    
    b
    )
    
    
    823
    
    
    
    6676.75% Unsecured senior notes of US$250 million (2007US$250 million), maturing in 2013
    
    
    b
    )
    
    
    306
    
    
    
    247Capital lease obligations
    
    
    e
    )
    
    
    1
    
    
    
    2Other debts of subsidiaries
    
    
    
    
    
    
    15
    
    
    
    15Other debts without recourse to the Company
    
    
    
    
    
    
    47
    
    
    
    21,719
    
    
    
    1,586Less: Unamortized financing costs
    
    
    
    
    
    
    11
    
    
    
    12Total long-term debt
    
    
    
    
    
    
    1,708
    
    
    
    1,574Less:Current portion of debts of subsidiaries
    
    
    
    
    
    
    2
    
    
    
    3Current portion of debts without recourse to the Company
    
    
    f
    )
    
    
    34
    
    
    
    136
    
    
    
    41,672
    
    
    
    1,570
 a)
    
    On December 29, 2006, in connection with the acquisition of the remaining outstanding common
shares of Norampac, the Company completed the refinancing of its $875 million (including
$325 million of Norampac) credit facility to provide for new $850 million credit facilities
consisting of a $750 million secured revolving credit facility maturing in December 2011 and a
$100 million secured term facility maturing in October 2012. The term facility can be
reimbursed without penalty at the Companys option any time prior to maturity. The Companys
obligations under the revolving credit facility and the term facility are secured by all
inventory and receivables of the Company and its subsidiaries located in North America and by
the property, plant and equipment of five of its mills.On June 27, 2007, the Company amended its credit facility to add a new 12-month unsecured
revolving credit facility in the amount of $100 million to provide additional availability of
funds maturing in June 2008. On May 7, 2008, the Company amended its credit facility to extend
its 12-month unsecured revolving credit facility in the amount of $100 million from June 2008 to
June 2009 and to postpone the change of the required covenants until July 1, 2009. As at December
31, 2008 the unsecured credit facility was unused.On February 13, 2009, the Company entered into an agreement to amend its existing bank credit
agreement. Under the terms of the amendment the existing financial covenants, namely the maximum
funded debt to capitalization ratio of 65% and the minimum interest coverage of 2.25x will remain
unchanged until its maturity of the credit facility. As a result of the amendment, the interest
rate applicable to borrowings outstanding was increased. The amendment also cancels the unsecured
revolving credit facility in the amount of $100 million which was originally scheduled to
terminate in June 2009.As at December 31, 2008, accounts receivable and inventories totaling approximately $825 million
(2007$749 million) as well as property, plant and equipment totaling approximately $208 million
(2007$220 million) were pledged as collateral for the Companys revolving credit facility.b)
    
    As at December 31, 2008, the fair value of the unsecured senior notes and the capital lease
obligations of the Company was estimated at $571 million (December 31, 2007$856 million)
based on the market value of the unsecured senior notes and on discounted future cash flows
using interest rates available for issues with similar terms and average maturities.In 2008, the Company purchased US$3 million of nominal value of its 7.25% Unsecured senior notes
for an amount of US$1,7 million. These notes were not cancelled and are still outstanding as at
December 31, 2008 but are held by the Company. The gain resulting from the difference between the
nominal value and the amount paid has been recorded in earnings in reduction of the foreign
exchange loss on long-term debt.c)
    
    As at December 31, 2008, the long-term debt included amounts denominated in foreign
currencies of US$1,035 million and 75 million (December 31, 2007US$1,002 million and
58 million).d)
    
    The estimated aggregate amounts of repayments on long-term debt, excluding capital lease
obligations, premium on long-term debt and other debts, in each of the next five years are as
follows:
 Years ending December 31,2009
    
    
    352010
    
    
    42011
    
    
    4312012
    
    
    1042013
    
    
    1,133Thereafter
    
    
    5
 27




---



##### 



e)
    
    As at December 31, 2008, future minimum payments under capital lease obligations is
$1 million for the year ending December 31, 2009.f)
    
    As at December 31, 2008, Reno De Medici S.p.A. (RdM) was not in compliance with certain
contractual obligations under two loans signed in 2006 with its lenders. On February 12, 2009,
the lenders agreed to waive RdMs obligations as at December 31, 2008. RdM is currently in
discussion with its lenders to resolve this matter for 2009 and for the years thereafter. As a
result, the long-term debt in the amount of $32 million (19 million) is presented in the
current portion.
  Note
    
    
    2008
    
    
    2007Employee future benefits
    
    
    16b
    )
    
    
    124
    
    
    
    110Future income taxes
    
    
    14c
    )
    
    
    199
    
    
    
    228Fair value of derivative financial liabilities
    
    
    
    
    
    
    43
    
    
    
    1Legal settlement
    
    
    4d
    )
    
    
    9
    
    
    
    11Non-controlling interest
    
    
    
    
    
    
    22
    
    
    
    25Other
    
    
    
    
    
    
    16
    
    
    
    9413
    
    
    
    384Less: Current portion, included in accounts payable and accrued liabilities
    
    
    
    
    
    
    36
    
    
    
    7Total other liabilities
    
    
    
    
    
    
    377
    
    
    
    377
  Note
    
    
    2008
    
    
    2007Common shares
    
    
    b), d
    )
    
    
    506
    
    
    
    509Adjustment relating to stock options and others
    
    
    c
    )
    
    
    9
    
    
    
    8515
    
    
    
    517
 a)
    
    Capital risk managementCapital is defined as long-term debt, bank loans and advances net of cash and cash equivalents
and shareholders equity which includes capital stock.
 2008
    
    
    2007Cash and cash equivalent
    
    
    (11
    )
    
    
    (25
    )Bank loan and advances
    
    
    104
    
    
    
    47Long-term debt, including current portion
    
    
    1,708
    
    
    
    1,5741,801
    
    
    
    1,596Shareholders equity
    
    
    1,256
    
    
    
    1,199Total capital
    
    
    3,057
    
    
    
    2,795
 The Companys objectives when managing capital are:
 
    
    to safeguard the Companys ability to continue as a going concern in order to provide
returns to shareholders;
    
    to maintain an optimal capital structure and reduce the cost of capital;
    
    to make proper capital investments that are significant to ensure the Company remains
competitive;
    
    to redeem common shares based on an annual redemption program.
 The Company sets the amount of capital in proportion to risk. The Company manages its capital
structure and makes adjustments to it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust the capital structure,
the Company may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares and acquire or sell assets to improve its financial performance
and flexibility.The Company monitors capital on a monthly and quarterly basis based on different financial ratios
and non-financial performance indicators. Also, the Company must conform to certain financial
ratios under its various credit agreements. These are a maximum ratio of funded debt to
capitalization of 65% and a minimum interest coverage ratio of 2.25x. The Company must also
comply with a consolidated interest coverage ratio to incur additional debt. Funded debt is
defined as liabilities as per the consolidated balance sheet, including guarantees and liens
granted in respect of funded debt of another person but excluding other long-term liabilities,
trade accounts payable, obligations under operating leases and other accrued obligations
(2008$1,714 million; 2007$1,619 million). The capitalization ratio is calculated as
shareholders equity as shown in consolidated balance sheet plus the funded debt. The interest
coverage ratio is defined as EBITDA to interest expense. The EBITDA is defined as net income of
the last four quarters plus interest expense, income taxes, amortization and depreciation,
expense for stock options and dividends received from a person who is not a credit party
(2008$285 million; 2007$310 million). Excluded from net income are share of results of equity
investments and gains or losses from non-recurring items. Interest expense is calculated as
interest and financial charges determined in accordance with Canadian GAAP plus any capitalized
interest but excluding the amortization of deferred financing costs, upfront and financing costs
and also unrealized gains or losses arising from hedging agreements. It also excludes any gains
or losses on the translation of any long-term debt denominated in a foreign currency. The
consolidated interest coverage ratio to incur additional debt is calculated as defined in the
senior notes indenture dated February 5, 2003.
 28




---



##### 



As of December 31, 2008, the funded debt to capitalization ratio stood at 57.7% and the interest
coverage ratio was at 2.95x. The Company is in compliance with the ratio requirements of its
lenders which were successfully renegotiated on February 13, 2009 as described above. If cash is
available, the Company will use it to reduce its revolving facility utilization.The Companys credit facility is subject to customary terms and conditions for loans of this
nature, including limits on incurring additional indebtedness and granting liens or selling
assets without the consent of the lenders.The unsecured senior notes are subject to customary covenants restricting the Companys ability
to, among other things, incur additional debt, pay dividends and make other restricted payments
as defined in the Indenture dated February 5, 2003.On a regular basis, the Company meets with the rating agencies. On August 13, 2008, the credit
rating related to the Companys secured and unsecured debt and overall corporate rating was
downgraded by Standard & Poors reflecting, in their view, the Companys deteriorating financial
risk profile and high leverage. Their outlook is negative. On October 6, 2008, Moodys Investors
Service revised its outlook to negative reflecting, in their view, the Companys weakened credit
protection metrics and liquidity position but did not change its rating. The downgrade from
Standard & Poors did not have any effects on the Companys credit agreement with respect to its
covenants and interest rate margins.The Company normally invests between $100 and $200 million yearly in purchases of property, plant
and equipment. These amounts are carefully reviewed during the course of the year in relation to
operating results and strategic actions approved by the Board. These investments, combined with
annual maintenance, enhance the stability of the Companys business units and improve cost
competitiveness through new technology and improved process procedures.The Company has an annual share redemption program in place to redeem its outstanding common
shares when the market price is judged appropriate by management. In addition to limitations to
the normal course issuer bid, the Companys ability to redeem common shares is limited by its
senior notes indenture.b)
    
    The authorized capital stock of the Company consists of an unlimited number of common shares,
without nominal value, and an unlimited number of Class A and B shares issuable in series
without nominal value. Over the past two years, the common shares have fluctuated as follows:
 Note
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    2007Number of shares
    
    
    $
    
    
    Number of shares
    
    
    $BalanceBeginning of year
    
    
    
    
    
    
    99,144,351
    
    
    
    509
    
    
    
    99,533,654
    
    
    
    510Shares issued on exercise of stock options
    
    
    c
    )
    
    
    
    
    
    
    
    
    
    
    103,397
    
    
    
    1Redemption of common shares
    
    
    d
    )
    
    
    (595,500
    )
    
    
    (3
    )
    
    
    (492,700
    )
    
    
    (2
    )BalanceEnd of year
    
    
    
    
    
    
    98,548,851
    
    
    
    506
    
    
    
    99,144,351
    
    
    
    509
 c)
    
    Under the terms of a share option plan adopted on December 15, 1998 for officers and key
employees of the Company, 6,300,075 common shares have specifically reserved for issuance.
Each option will expire at a date not to exceed 10 years following the grant date of the
option. The exercise price of an option shall not be lower than the market value of the share
at the date of grant, determined as the average of the closing price of the share on the
Toronto Stock Exchange on the five trading days preceding the date of grant. The terms for
exercising the options granted before December 31, 2003 are 25% of the number of shares under
option within 12 months after the date of grant, and up to an additional 25% every 12 months
after the first, second and third anniversary dates of grant. The terms for exercising the
options granted in 2004 and thereafter are 25% of the number of shares under option within 12
months after the first anniversary date of grant, and up to an additional 25% every 12 months
after the second, third and fourth anniversary dates of grant. Options cannot be exercised if
the market value of the share is lower than its book value at the date of grant. The
stock-based compensation cost related to these options amounted to $1 million
(2007$1.4 million; 2006$1.4 million).Changes in the number of options outstanding as at December 31 are as follows:
 2008
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    2006Weighted average
    
    
    
    
    
    
    Weighted average
    
    
    
    
    
    
    Weighted averageNumber of options
    
    
    exercise price 
$
    
    
    Number of options
    
    
    exercise price 
$
    
    
    Number of options
    
    
    exercise price 
$Beginning of year
    
    
    2,459,056
    
    
    
    11.28
    
    
    
    2,315,391
    
    
    
    11.14
    
    
    
    2,115,167
    
    
    
    11.03Granted
    
    
    539,384
    
    
    
    7.81
    
    
    
    422,068
    
    
    
    11.83
    
    
    
    417,416
    
    
    
    11.49Exercised
    
    
    
    
    
    
    
    
    
    
    (103,397
    )
    
    
    7.76
    
    
    
    (131,229
    )
    
    
    9.35Forfeited
    
    
    (94,934
    )
    
    
    12.00
    
    
    
    (175,006
    )
    
    
    12.78
    
    
    
    (85,963
    )
    
    
    13.03End of year
    
    
    2,903,506
    
    
    
    10.61
    
    
    
    2,459,056
    
    
    
    11.28
    
    
    
    2,315,391
    
    
    
    11.14Options exercisableEnd of year
    
    
    31,496
    
    
    
    8.29
    
    
    
    31,496
    
    
    
    8.29
    
    
    
    1,426,071
    
    
    
    10.47
 29




---



##### 



The following options were outstanding as at December 31, 2008:
 Options outstanding
    
    
    
    
    
    
    Options exercisableWeighted average
    
    
    
    
    
    
    Weighted averageYear granted
    
    Number of options
    
    
    exercise price $
    
    
    Number of options
    
    
    exercise price 
$
    
    
    Expiration date1999
    
    
    284,415
    
    
    
    8.49
    
    
    
    1,770
    
    
    
    12.29
    
    
    
    20092000
    
    
    29,726
    
    
    
    8.05
    
    
    
    29,726
    
    
    
    8.05
    
    
    
    20102001
    
    
    272,011
    
    
    
    6.82
    
    
    
    
    
    
    
    
    
    
    
    20112002
    
    
    179,171
    
    
    
    13.24
    
    
    
    
    
    
    
    
    
    
    
    20122003
    
    
    207,449
    
    
    
    13.04
    
    
    
    
    
    
    
    
    
    
    
    20132004
    
    
    315,190
    
    
    
    13.01
    
    
    
    
    
    
    
    
    
    
    
    20142005
    
    
    310,696
    
    
    
    12.73
    
    
    
    
    
    
    
    
    
    
    
    20152006
    
    
    372,294
    
    
    
    11.49
    
    
    
    
    
    
    
    
    
    
    
    20162007
    
    
    400,161
    
    
    
    11.83
    
    
    
    
    
    
    
    
    
    
    
    20172008
    
    
    532,393
    
    
    
    7.81
    
    
    
    
    
    
    
    
    
    
    
    20182,903,506
    
    
    
    
    
    
    
    31,496
 The following assumptions were used to estimate the fair value, at the date of grant, of each
option issued to employees:
 2008
    
    
    2007
    
    
    2006Risk-free interest rate
    
    
    4.1
    %
    
    
    4.2
    %
    
    
    4.5
    %Expected dividend yield
    
    
    2.14
    %
    
    
    1.37
    %
    
    
    1.46
    %Expected life of options
    
    6 years
    
    6 years
    
    6 yearsExpected volatility
    
    
    24
    %
    
    
    24
    %
    
    
    33
    %Weighted average fair value of issued options
    
    $
    1.73
    
    
    $
    3.22
    
    
    $
    3.65
 d)
    
    In 2008, in the normal course of business, the Company renewed its redemption program of a
maximum of 4,946,517 common shares with the Toronto Stock Exchange, which shares represent
approximately 5% of issued and outstanding common shares. The redemption authorization is
valid from March 13, 2008 to March 12, 2009. In 2008, the Company redeemed 595,500 common
shares under this program for a consideration of approximately $4 million (2007$5 million;
2006$4 million).e)
    
    The basic and diluted net earnings (loss) per common share are calculated as follows:
 2007
    
    
    2006Restated
    
    
    Restated2008
    
    
    (Note 2c))
    
    
    (Note 2c))Net earnings (loss) available to common shareholders
    
    
    (55.2
    )
    
    
    95.8
    
    
    
    4.3Weighted average number of common shares
    
    
    98.8
    
    
    
    99.3
    
    
    
    80.9Dilution effect of stock options
    
    
    
    
    
    
    
    
    
    
    0.1Adjusted weighted average number of common shares
    
    
    98.8
    
    
    
    99.3
    
    
    
    81.0Basic and diluted net earnings (loss) per common share
    
    
    (0.56
    )
    
    
    0.96
    
    
    
    0.05
 In calculating diluted earnings per share for 2008, 2007 and 2006, stock options of 2,903,506,
2,429,330 and 1,636,110 respectively were excluded due to their antidilutive effect.f)
    
    The Company offers to its Canadian employees a share purchase plan of its common shares.
Employees can contribute voluntarily up to a maximum of 5% of their salary and, if certain
conditions are met, the Company will contribute to the plan 25% of the employees
contribution.The shares are purchased on the market on a predetermined date each month. For the year ended
December 31, 2008, the Companys contribution to the plan amounted to $0.7 million
(2007$0.7 million and 2006$0.6 million).g)
    
    The Company has a Deferred Share Unit Plan for the benefit of its external directors allowing
them to receive all or a portion of their annual compensation in the form of Deferred Share
Units (DSUs). A DSU is a notional unit equivalent in value to the Companys common share. Upon
resignation from the Board of Directors, participants are entitled to receive the payment of
their cumulated DSUs in the form of cash based on the average price of the Companys common
shares as traded on the open market during the five days before the date of the participants
resignation.The DSU expense and the related liability are recorded at the grant date. The liability is
adjusted periodically to reflect any variation in the market value of the common shares. As at
December 31, 2008, the Company had a total of 109,190 DSUs outstanding (200763,200),
representing a long-term liability of $0.4 million (2007$0.5 million).
 30




---



##### 



a)
    
    Other gains and losses are detailed as follows:
 Note
    
    
    2008
    
    
    2007
    
    
    2006Loss on a contribution to a joint venture
    
    
    21
    
    
    
    5
    
    
    
    
    
    
    
    Losses (gains) on disposal of property, plant and equipment and other assets
    
    
    12b), c), d
    )
    
    
    
    
    
    
    6
    
    
    
    Legal settlement
    
    
    12e
    )
    
    
    
    
    
    
    2
    
    
    
    Gain on business disposal
    
    
    5d
    )
    
    
    
    
    
    
    (25
    )
    
    
    (4
    )5
    
    
    
    (17
    )
    
    
    (4
    )
 b)
    
    In May 1, 2007, the Company sold the building of its Toronto (Pickering) tissue converting
facility, closed in 2005, for an amount of $7 million. The Company realized a gain of
$1 million.
 c)
    
    In 2007, the Company completed the sale of its Red Rock linerboard mill located in Ontario
which was indefinitely shut down. The agreement resulted in the Company paying the purchaser
$10 million. An amount of $5 million has been paid in 2007 and the remaining $5 million is
expected to be paid in 2009.
 d)
    
    In 2007, the Company sold an investment in a privately-held company affiliated to a related
director for a cash consideration and a gain of $3 million.
 e)
    
    In 2007, the Company recorded a provision of $2 million as a settlement related to the action
filed by ServiceCore, Inc.
        a)
    
    The impairment charges and closure and restructuring costs are detailed as follows:
 2008
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    2006Closure and
    
    
    
    
    
    
    Closure and
    
    
    
    
    
    
    Closure andrestructuring
    
    
    
    
    
    
    restructuring
    
    
    
    
    
    
    restructuringImpairment
    
    
    costs
    
    
    Impairment
    
    
    costs
    
    
    Impairment
    
    
    costsBoxboardToronto
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BoxboardCorporate
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BoxboardMontréal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1BoxboardFjordcell
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1BoxboardDopaco (Bakersfield)
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BoxboardEurope (La Rochette)
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BoxboardRdM (Blendecques)
    
    
    1
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BoxboardGoodwill (manufacturing)
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ContainerboardRed Rock and others
    
    
    5
    
    
    
    6
    
    
    
    3
    
    
    
    5
    
    
    
    40
    
    
    
    12Specialty products
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    3Specialty productsboard mill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    3Tissue
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    27
    
    
    
    3
    
    
    
    6
    
    
    
    47
    
    
    
    20
 31




---



##### 



b)
    
    The following table shows the reconciliation of all closure and restructuring cost
provisions. The balance as at December 31, 2008 is expected to be paid in 2009. It includes
the provisions presented in discontinued operations:
 2008
    
    
    2007
    
    
    2006BalanceBeginning of year
    
    
    19
    
    
    
    47
    
    
    
    55Additional provisionsSeverance and pension liability
    
    
    26
    
    
    
    7
    
    
    
    26Writedown of inventories
    
    
    
    
    
    
    4
    
    
    
    (2
    )Others
    
    
    1
    
    
    
    16
    
    
    
    Non-monetary itemsWritedown of inventories
    
    
    
    
    
    
    (4
    )
    
    
    2Pension liability adjustments and others
    
    
    
    
    
    
    (7
    )
    
    
    (7
    )Liability assumed from Norampac acquisition
    
    
    
    
    
    
    
    
    
    
    8Closure and restructuring cost payments
    
    
    (24
    )
    
    
    (44
    )
    
    
    (35
    )BalanceEnd of year
    
    
    22
    
    
    
    19
    
    
    
    47
  a)
    
    The provision for (recovery of) income taxes is as follows:
 2008
    
    
    2007
    
    
    2006Current
    
    
    20
    
    
    
    33
    
    
    
    34Future
    
    
    (52
    )
    
    
    (22
    )
    
    
    (28
    )(32
    )
    
    
    11
    
    
    
    6
 b)
    
    The provision for income taxes based on the effective income tax rate differs from the
provision for income taxes based on the combined basic rate for the following reasons:
 2008
    
    
    2007
    
    
    2006Provision for (recovery of) income taxes based on the combined
basic Canadian and provincial income tax rate
    
    
    (35
    )
    
    
    34
    
    
    
    6Adjustment for income taxes arising from the following:Difference in statutory income tax rate of foreign operations
    
    
    (2
    )
    
    
    (9
    )
    
    
    (4
    )Unrecognized tax benefit arising from current losses
    
    
    10
    
    
    
    9
    
    
    
    8Non-taxable portion of foreign exchange gain on long-term debt
    
    
    38
    
    
    
    (10
    )
    
    
    Permanent differences1
    
    
    (32
    )
    
    
    (1
    )
    
    
    Permanent differencesothers
    
    
    (4
    )
    
    
    
    
    
    
    Increase (decrease) in future income taxes resulting from a
substantively enacted change in tax rates
    
    
    
    
    
    
    (16
    )
    
    
    (3
    )Charges for calculation of temporary differences
    
    
    
    
    
    
    2
    
    
    
    Others
    
    
    (7
    )
    
    
    2
    
    
    
    (1
    )3
    
    
    
    (23
    )
    
    
    Provision for (recovery of) income taxes
    
    
    (32
    )
    
    
    11
    
    
    
    6
 1.
    
    The amount of $32 million for the ended December 31, 2008 represents the non taxable portion of
the gain realized on the various transactions concluded in 2008 with respect mainly to foreign
exchange derivatives contracts (see note 18).
 32




---



##### 



c)
    
    Future income taxes include the following items:
 2008
    
    
    2007Future income tax assetsTax benefit arising from income tax losses
    
    
    206
    
    
    
    163Employee future benefits
    
    
    28
    
    
    
    26Unused tax credits and expenses on research not deducted
    
    
    27
    
    
    
    18Others
    
    
    25
    
    
    
    20Valuation allowance
    
    
    (84
    )
    
    
    (44
    )202
    
    
    
    183Future income tax liabilitiesProperty, plant and equipment
    
    
    274
    
    
    
    265Foreign exchange gain on long-term debt
    
    
    30
    
    
    
    68Employee future benefits
    
    
    13
    
    
    
    12Other assets
    
    
    46
    
    
    
    45Others
    
    
    26
    
    
    
    17389
    
    
    
    407Future income taxes
    
    
    (187
    )
    
    
    (224
    )Future income taxes included in Accounts receivable
    
    
    12
    
    
    
    4Future income taxes included in Other liabilities
    
    
    (199
    )
    
    
    (228
    )(187
    )
    
    
    (224
    )
 d)
    
    The Company has accumulated losses for income tax purposes amounting to approximately
$601 million which may be carried forward to reduce taxable income in future years. The future
tax benefit resulting from the deferral of $378 million of these losses has been recognized in
the accounts as a future income tax asset. Income tax losses as at December 31, 2008 are
detailed as follows:
 Unrecognized
    
    
    Recognized
    
    
    Totaltax losses
    
    
    tax losses
    
    
    tax losses
    
    
    MaturityCanada
    
    
    
    
    
    
    11
    
    
    
    11
    
    
    
    2010
    
    
    
    18
    
    
    
    18
    
    
    
    2014
    
    
    
    42
    
    
    
    42
    
    
    
    2015
    
    
    
    23
    
    
    
    23
    
    
    
    2026
    
    
    
    30
    
    
    
    30
    
    
    
    2027
    
    
    
    62
    
    
    
    62
    
    
    
    2028United States
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    20122
    
    
    
    5
    
    
    
    7
    
    
    
    20182
    
    
    
    16
    
    
    
    18
    
    
    
    20192
    
    
    
    7
    
    
    
    9
    
    
    
    2020
    
    
    
    8
    
    
    
    8
    
    
    
    2021
    
    
    
    5
    
    
    
    5
    
    
    
    2022
    
    
    
    8
    
    
    
    8
    
    
    
    2023Europe
    
    
    215
    
    
    
    143
    
    
    
    358
    
    
    Indefinitely223
    
    
    
    378
    
    
    
    601
  a)
    
    Changes in non-cash working capital components are detailed as follows:
 2008
    
    
    2007
    
    
    2006Accounts receivable
    
    
    14
    
    
    
    (47
    )
    
    
    (13
    )Inventories
    
    
    10
    
    
    
    (47
    )
    
    
    10Accounts payable and accrued liabilities
    
    
    (55
    )
    
    
    5
    
    
    
    38(31
    )
    
    
    (89
    )
    
    
    35
 b)
    
    Additional information
 2008
    
    
    2007
    
    
    2006Interest paid
    
    
    97
    
    
    
    108
    
    
    
    80Income taxes paid
    
    
    22
    
    
    
    21
    
    
    
    10
 33




---



##### 



a)
    
    The expense for employee future benefits as at December 31 is as follows:
 2008
    
    
    
    
    
    
    2007Pension plans
    
    
    Other plans
    
    
    Pension plans
    
    
    Other PlansCurrent service costs
    
    
    13
    
    
    
    3
    
    
    
    13
    
    
    
    3Interest cost
    
    
    34
    
    
    
    5
    
    
    
    37
    
    
    
    6Past service costs
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    1Actual return on plan assets
    
    
    91
    
    
    
    
    
    
    
    (19
    )
    
    
    Actuarial losses on accrued benefit obligation
    
    
    (100
    )
    
    
    (18
    )
    
    
    (16
    )
    
    
    (6
    )Curtailment and settlement
    
    
    6
    
    
    
    (3
    )
    
    
    (5
    )
    
    
    Others
    
    
    4
    
    
    
    3
    
    
    
    (2
    )
    
    
    (1
    )Benefit costs before adjustments to recognize long-term nature of
employee future benefit costs
    
    
    50
    
    
    
    (10
    )
    
    
    10
    
    
    
    3Difference between expected return and actual return on plan assets for
the year
    
    
    (133
    )
    
    
    
    
    
    
    (26
    )
    
    
    Difference between actuarial loss for the year and actuarial loss on
accrued benefit obligation for the year
    
    
    101
    
    
    
    17
    
    
    
    17
    
    
    
    6Difference between amortization of past service costs and actual plan
amendments for the year
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Others
    
    
    (4
    )
    
    
    (3
    )
    
    
    3
    
    
    
    1Adjustments to recognize long-term nature of employee future benefit costs
    
    
    (36
    )
    
    
    14
    
    
    
    (7
    )
    
    
    6Recognized costs for defined benefit pension plans
    
    
    14
    
    
    
    4
    
    
    
    3
    
    
    
    9Recognized costs for defined contribution pension plans
    
    
    21
    
    
    
    
    
    
    
    21
    
    
    
    Total expense for employee future benefits
    
    
    35
    
    
    
    4
    
    
    
    24
    
    
    
    9
  34




---



##### 



b)
    
    The funded status of the defined benefit plans and the other complementary retirement benefit
plans and post-employment benefit plans as at December 31 are as follows:
 2008
    
    
    
    
    
    
    2007Pension plans
    
    
    Other plans
    
    
    Pension plans
    
    
    Other PlansAccrued benefit obligationBeginning of year
    
    
    629
    
    
    
    110
    
    
    
    780
    
    
    
    112Current service costs
    
    
    13
    
    
    
    3
    
    
    
    13
    
    
    
    3Interest cost
    
    
    34
    
    
    
    5
    
    
    
    37
    
    
    
    6Employees contributions
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    Actuarial losses
    
    
    (100
    )
    
    
    (18
    )
    
    
    (16
    )
    
    
    (6
    )Benefits paid
    
    
    (40
    )
    
    
    (7
    )
    
    
    (33
    )
    
    
    (5
    )Business acquisitions, disposals and closures
    
    
    (56
    )
    
    
    (4
    )
    
    
    (154
    )
    
    
    Past service costs
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    1Others
    
    
    7
    
    
    
    3
    
    
    
    (4
    )
    
    
    (1
    )End of year
    
    
    493
    
    
    
    92
    
    
    
    629
    
    
    
    110Plan assetsBeginning of year
    
    
    626
    
    
    
    
    
    
    
    753
    
    
    
    Actual return on plan assets
    
    
    (91
    )
    
    
    
    
    
    
    19
    
    
    
    Employers contributions
    
    
    31
    
    
    
    7
    
    
    
    41
    
    
    
    5Employees contributions
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    Benefits paid
    
    
    (40
    )
    
    
    (7
    )
    
    
    (33
    )
    
    
    (5
    )Business acquisitions, disposals and closures
    
    
    (57
    )
    
    
    
    
    
    
    (155
    )
    
    
    Others
    
    
    3
    
    
    
    
    
    
    
    (3
    )
    
    
    End of year
    
    
    476
    
    
    
    
    
    
    
    626
    
    
    
    Reconciliation of funded statusFair value of plan assets
    
    
    476
    
    
    
    
    
    
    
    626
    
    
    
    Accrued benefit obligation
    
    
    493
    
    
    
    92
    
    
    
    629
    
    
    
    110Funded status of plandeficit
    
    
    (17
    )
    
    
    (92
    )
    
    
    (3
    )
    
    
    (110
    )Unrecognized net actuarial loss
    
    
    81
    
    
    
    (14
    )
    
    
    42
    
    
    
    1Unamortized transitional balance
    
    
    (2
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (1
    )Unamortized past service costs
    
    
    20
    
    
    
    4
    
    
    
    19
    
    
    
    3Others
    
    
    (5
    )
    
    
    (1
    )
    
    
    4
    
    
    
    1Accrued benefit asset (liability)End of year
    
    
    77
    
    
    
    (104
    )
    
    
    60
    
    
    
    (106
    )
  2008
    
    
    
    
    
    
    
    
    
    
    2007Pension plans
    
    
    Other plans
    
    
    Total
    
    
    Pension plans
    
    
    Other plans
    
    
    TotalEmployee future benefit asset, included in Other assets
    
    
    97
    
    
    
    
    
    
    
    97
    
    
    
    68
    
    
    
    
    
    
    
    68Employee future benefit liability, included in Other
liabilities
    
    
    (20
    )
    
    
    (104
    )
    
    
    (124
    )
    
    
    (4
    )
    
    
    (106
    )
    
    
    (110
    )Employee future benefit liability, included in
Accounts payable and accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )77
    
    
    
    (104
    )
    
    
    (27
    )
    
    
    60
    
    
    
    (106
    )
    
    
    (46
    )
 c)
    
    The following amounts relate to plans that are not fully funded as at December 31:
 2008
    
    
    
    
    
    
    2007Pension plans
    
    
    Other plans
    
    
    Pension plans
    
    
    Other PlansFair value of plan assets
    
    
    217
    
    
    
    
    
    
    
    117
    
    
    
    Accrued benefit obligation
    
    
    (268
    )
    
    
    (92
    )
    
    
    (160
    )
    
    
    (110
    )Funded deficit
    
    
    (51
    )
    
    
    (92
    )
    
    
    (43
    )
    
    
    (110
    )
 35




---



##### 



d)
    
    The main actuarial assumptions adopted in measuring the accrued benefit obligation and
expenses as at December 31 are as follows:
 2008
    
    
    
    
    
    
    2007Pension plans
    
    
    Other plans
    
    
    Pension plans
    
    
    Other PlansAccrued benefit obligation as at December 31Discount rate
    
    
    7.50
    %
    
    
    7.50
    %
    
    
    5.50
    %
    
    
    5.50
    %Rate of compensation increase
    
    2.50 to 3.75%
    
    2.25 to 3.90%
    
    
    2.00 to 3.75
    %
    
    2.00% to 5.00%Benefit costs for years ended December 31Discount rate
    
    
    5.50
    %
    
    
    5.50
    %
    
    
    5.25
    %
    
    
    5.25
    %Expected long-term return on assets
    
    
    7.00
    %
    
    
    
    
    
    
    7.00
    %
    
    
    Rate of compensation increase
    
    2.00 to 3.75%
    
    2.00 to 3.75%
    
    
    2.00 to 5.00
    %
    
    
    2.25 to 3.50
    %Assumed health care cost trend rates at December 31Rate increase in health care costs
    
    
    
    
    
    9.20 to 10.00%
    
    
    
    
    
    
    5.60 to 9.50
    %Cost trend rates decline to
    
    
    
    
    
    
    5.00
    %
    
    
    
    
    
    
    4.30 to 5.00
    %Year the rate should stabilize
    
    
    
    
    
    
    2018
    
    
    
    
    
    
    
    2015
 e)
    
    Assumed rate increases in health care costs have a significant effect on the amounts reported
for the health care plans. A 1% change in assumed health care cost trend rates would have the
following effects for 2008:
 Increase of 1%
    
    
    Decrease of 1%Current service costs and interest cost
    
    
    0.7
    
    
    
    (0.1
    )Accrued benefit obligationEnd of year
    
    
    2.5
    
    
    
    (2.3
    )
 f)
    
    The plan assets allocation and investment target allocation as at December 31 are detailed as
follows:
 2008
    
    
    2007Plan assets allocationMoney market
    
    
    3
    %
    
    
    3
    %Debt securities
    
    
    39
    %
    
    
    43
    %Equity securities
    
    
    58
    %
    
    
    54
    %Total
    
    
    100
    %
    
    
    100
    %
 The plan assets do not include shares or debt securities of the Company. Annual benefit
annuities, of an approximate value of $3 million, are pledged by insurance contracts established
by the Company.
 2008
    
    
    2007Investment target allocationMoney market or others
    
    
    6
    %
    
    
    4
    %Debt securities
    
    
    43
    %
    
    
    42
    %Equity securities
    
    
    51
    %
    
    
    54
    %Total
    
    
    100
    %
    
    
    100
    %
 Target allocation is established so as to maximize return while considering an acceptable level
of risk in order to meet the plan obligations on a long-term basis.Investment objectives for the plan assets are the following: optimizing return while considering
an acceptable level of risk, maintaining an adequate diversification, controlling the risk
according to different asset categories, and maintaining a long-term objective of return on
investments.Investment guidance is established for each investment manager. It includes parameters that must
be followed by managers and presents criteria for diversification, non-eligible assets and
minimum quality of investments as well as for return objectives. Unless indicated otherwise, the
managers cannot use any derivative product or invest more than 10% of their assets in one
particular security.
 36




---



##### 



g)
    
    Estimated future benefit payments

Future benefit payments for defined benefit pension plans and other post-employment benefits,
taking into consideration future participation, are estimated as follows:
 Pension plans
    
    
    Other plansYears ending December 31,2009
    
    
    49
    
    
    
    62010
    
    
    34
    
    
    
    62011
    
    
    34
    
    
    
    62012
    
    
    35
    
    
    
    72013
    
    
    36
    
    
    
    72014-2018
    
    
    198
    
    
    
    43
  a)
    
    Future minimum payments under operating leases and other commercial commitments (mainly
composed of raw materials, natural gas, steam and electricity) are as follows:
 Other commercialOperating leases
    
    
    commitmentsYears ending December 31,2009
    
    
    42
    
    
    
    1302010
    
    
    35
    
    
    
    692011
    
    
    27
    
    
    
    412012
    
    
    20
    
    
    
    242013
    
    
    14
    
    
    
    17Thereafter
    
    
    37
    
    
    
    66
 b)
    
    The Company has guaranteed the payment of approximately $1 million under operating leases
held by third parties. These guarantees are not likely to be called and, therefore, no
liability has been recognized in the consolidated financial statements.In addition, the Company has guaranteed the debt of one of its joint ventures. The maximum amount
guaranteed is US$0.5 million (2007US$1.5 million). As at December 31, 2008, the debt of this
joint venture, guaranteed by the Company, amounts to US$0.5 million (2007US$0.9 million). This
guarantee is not likely to be called and, as a result, no liability has been recognized in the
consolidated financial statements.c)
    
    In the normal course of operations, the Company is party to various legal actions and
contingencies, mostly related to contract disputes, environmental and product warranty claims,
and labour issues. While the final outcome with respect to legal actions outstanding or
pending as at December 31, 2008 cannot be predicted with certainty, it is managements opinion
that the outcome will not have a material adverse effect on the Companys consolidated
financial position, results of its operations or its cash flows.d)
    
    The Company is currently working with representatives of the Ontario Ministry of the
Environment (MOE)Northern Region regarding its potential responsibility for an environmental
impact identified at its former Thunder Bay facility (the Mill). The MOE has requested that
the Company look into a management site plan relating to the sediment quality adjacent to the
Mills lagoon. Several meetings have been held during the year with the MOE and the other
potentially responsible party (PRP), and a study on the sediment quality and potential
remediation options has commenced. It is not possible at this time to estimate the Companys
obligation because of the uncertainty surrounding the extent of the environmental impact, the
portion to be shared with the PRP, the potential remediation alternatives and the concurrence
of the MOE.
    a) Market risk
 (i) Currency risk
  37




---



##### 



Notional amount
    
    
    Fair value2008
    
    Exchange rate
    
    
    Maturity
    
    
    (in millions)
    
    
    (in millions)Buy contracts:Foreign exchange forward contracts (US$ for CAN$)1
    
    
    1.1740
    
    
    February 15, 2013
    
    
    US$
    385
    
    
    
    4.6Foreign exchange forward contracts (US$ for CAN$)1
    
    
    1.1340
    
    
    May 31, 2013
    
    
    US$
    125
    
    
    
    5.8Foreign exchange forward contracts (US$ for CAN$)
    
    
    1.1041
    
    
    
    0 to 12 months
    
    
    US$
    4.3
    
    
    
    0.4Buy options2:Currency option instruments (US$ for CAN$)
    
    
    1.0110
    
    
    February 15, 2013
    
    
    US$
    12.5
    
    
    
    2.2Sell options:Currency option instruments (US$ for CAN$)
    
    
    1.0115
    
    
    February 14, 2013
    
    
    US$
    25
    
    
    
    (2.4
    )Sell contracts:Foreign exchange forward contracts (US$ for CAN$)
    
    
    1.1474
    
    
    
    0 to 12 months
    
    
    US$
    78
    
    
    
    (5.1
    )Foreign exchange forward contracts (US$ for CAN$)
    
    
    1.2433
    
    
    
    13 to 24 months
    
    
    US$
    13
    
    
    
    0.4Foreign exchange forward contracts (US$ for )
    
    
    0.7613
    
    
    
    0 to 12 months
    
    
    US$
    0.2
    
    
    
    Foreign exchange forward contracts (GBP for SEK)
    
    
    12.5354
    
    
    
    0 to 12 months
    
    
    GBP
    2.3
    
    
    
    0.4Foreign exchange forward contracts ( for SEK)
    
    
    9.8164
    
    
    
    0 to 12 months
    
    
    
    6.6
    
    
    
    (1.2
    )Foreign exchange forward contracts (GBP for )
    
    
    1.1285
    
    
    
    0 to 12 months
    
    
    GBP
    1.2
    
    
    
    0.2Foreign exchange forward contracts ( for CAN)
    
    
    1.6202
    
    
    
    0 to 12 months
    
    
    
    0.5
    
    
    
    Buy options:Currency option instruments (US$ for CAN$)
    
    
    1.0785
    
    
    
    0 to 12 months
    
    
    US$
    36.0
    
    
    
    (10.0
    )Currency option instruments (US$ for CAN$)
    
    
    1.2585
    
    
    
    13 to 24 months
    
    
    US$
    20
    
    
    
    (2.8
    )Currency option instruments (US$ for )
    
    
    0.7171
    
    
    
    0 to 12 months
    
    
    US$
    0.9
    
    
    
    Currency option instruments (GBP$ for )
    
    
    1.1165
    
    
    
    0 to 12 months
    
    
    GBP
    0.1
    
    
    
    Sell options2:Currency option instruments (US$ for CAN$)
    
    
    1.0767
    
    
    
    0 to 12 months
    
    
    US$
    9
    
    
    
    (1.5
    )
 
 1.
    
    On July 1, 2008, the Company designated as cash flow hedges of repayment of long-term denominated in US dollars foreign exchange forward contracts
amounting to US$850 million. In October 2008, the Company terminated, prior to maturity, foreign exchange forward contracts amounting to US$837.5
million for net cash proceeds of approximately $150 million. As these contracts were designated, as cash flow hedges, their fair value increment is
recorded under Accumulated Other Comprehensive Income (Loss) and will be recognized in earnings mostly in 2013. Currently with the termination of
these instruments, the Company entered into new foreign exchange forward contracts.2.
    
    Instruments not designated as hedges. 38




---



##### 



Notional amount
    
    
    Fair value2007
    
    Exchange rate
    
    
    Maturity
    
    
    (in millions)
    
    
    (in millions)Buy contracts:Foreign exchange forward contracts (US$ for CAN$)1
    
    
    0.9911
    
    
    February 15, 2013
    
    
    US$
    600
    
    
    
    6.0Foreign exchange forward contracts (US$ for CAN$)1
    
    
    0.9539
    
    
    May 31, 2013
    
    
    US$
    250
    
    
    
    9.1Sell options2:Currency option instruments (US$ for CAN$)
    
    
    1.0115
    
    
    February 15, 2013
    
    
    US$
    50
    
    
    
    (2.0
    )Sell contracts:Foreign exchange forward contracts (US$ for CAN$)
    
    
    1.0616
    
    
    
    0 to 12 months
    
    
    US$
    29.5
    
    
    
    2.1Foreign exchange forward contracts (US$ for )
    
    
    0.6808
    
    
    
    0 to 12 months
    
    
    US$
    14.8
    
    
    
    Foreign exchange forward contracts (GBP for SEK)
    
    
    13.632
    
    
    
    0 to 12 months
    
    
    GBP
    1.8
    
    
    
    0.2Foreign exchange forward contracts ( for SEK)
    
    
    9.33
    
    
    
    0 to 12 months
    
    
    
    5
    
    
    
    (0.1
    )Foreign exchange forward contracts (GBP for )
    
    
    2.7335
    
    
    
    0 to 12 months
    
    
    GBP
    0.012
    
    
    
    Buy options2:
    
    Strike rateCurrency option instruments (US$ for CAN$)
    
    
    1.00 to 1.1830
    
    
    
    0 to 12 months
    
    
    US$
    33.5
    
    
    
    3.0Currency option instruments (US$ for CAN$)
    
    
    1.00
    
    
    
    13 to 24 months
    
    
    US$
    3.0
    
    
    
    Currency option instruments (US$ for )
    
    
    0.7179
    
    
    
    0 to 12 months
    
    
    US$
    2.2
    
    
    
    (0.1
    )Sell options2:Currency option instruments (US$ for CAN$)
    
    
    1.08 to 1.10
    
    
    
    0 to 12 months
    
    
    US$
    15
    
    
    
    (0.2
    )
 
 1.
    
    In 2007, the Company entered into foreign exchange forward contracts and option agreements not designated as hedges. These contracts and
agreements, maturing in 2013, have been contracted to fix the currency rate at a weighted average rate of US$0.9813/CAN$ on a notional amount of
US$850 million.2.
    
    Instruments not designated as hedges.   Risk of currency on translation of self-sustaining foreign subsidiaries
     2008
    
    
    2007In millions of Canadian dollars
    
    Before hedges
    
    
    Hedges
    
    
    Net impact
    
    
    Before hedges
    
    
    Hedges
    
    
    Net impact10% change in the
CAN/US rate
    
    
    67
    
    
    
    50
    
    
    
    17
    
    
    
    60
    
    
    
    60
    
    
    
    10% change in the CAN/Euro rate
    
    
    19
    
    
    
    
    
    
    
    19
    
    
    
    9
    
    
    
    
    
    
    
    9
 (ii) Price risk
  39




---



##### 



2008Quantity
    
    Maturity
    
    Fair valueOld corrugated containers1
    
    
    141,000 s.t.
    
    2009 to 2011
    
    
    (10.8
    )Sorted office papers
    
    
    10,800 s.t.
    
    2009 to 2010
    
    
    (0.2
    )Electricity
    
    209,364 MWh
    
    2009 to 2011
    
    
    (3.4
    )Natural gas:Canadian portfolio
    
    2,507,000 GJ
    
    2009 to 2012
    
    
    0.7U.S. portfolio
    
    3,710,500 mmBtu
    
    2009 to 2013
    
    
    (8.3
    )
 2007Quantity
    
    Maturity
    
    
    Fair valueOld corrugated containers2
    
    
    83,500 s.t.
    
    
    2008
    
    
    
    2.3Electricity
    
    79,344 MWh
    
    
    2008
    
    
    
    0.2Natural gas:Canadian portfolio
    
    5,115,000 GJ
    
    
    2008 to 2012
    
    
    
    4.6U.S. portfolio
    
    3,951,700 mmBtu
    
    
    2008 to 2011
    
    
    
    2.0
 
 1.
    
    These instruments are not designated as hedges and exclude linerboard/old corrugated
containers spread of $57,000 s.t. with a fair value of $(1.5) million use for sales price risk
and purchase of lineboard.2.
    
    These instruments are not designated as hedges.    2008
    
    
    2007In millions of Canadian dollars1
    
    Before hedges
    
    
    Hedges
    
    
    Net impact
    
    
    Before hedges
    
    
    Hedges
    
    
    Net impactUS 15$/s.t. change in recycle paper price
    
    
    41
    
    
    
    3
    
    
    
    38
    
    
    
    41
    
    
    
    2
    
    
    
    39US 30$/s.t. change in commercial pulp price
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    7
    
    
    
    
    
    
    
    7US 1$/mmBTU. change in natural gas price
    
    
    13
    
    
    
    8
    
    
    
    5
    
    
    
    16
    
    
    
    11
    
    
    
    5US 1$/MWh change in electricity
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    3
 
 1.
    
    Sensitivity calculated with an exchange rate of $CAN/$US 1.25 for 2007 and 2008. (iii) Cash flow and fair value interest rate risk
       40




---



##### 



(iv) The loss (gain) on derivatives financial instruments is as follows:
 2008
    
    
    2007
    
    
    2006Unrealized loss (gain) on derivative financial instruments
    
    
    27
    
    
    
    
    
    
    
    (5
    )Realized loss (gain) on derivative financial instruments
    
    
    1
    
    
    
    (6
    )
    
    
    228
    
    
    
    (6
    )
    
    
    (3
    )
 b) Credit risk
      c) Liquidity risk
  2008Carrying
    
    
    Contractual
    
    
    Less than
    
    
    Between one
    
    
    Between two
    
    
    More thanamount
    
    
    cash flows
    
    
    one year
    
    
    and two years
    
    
    and five years
    
    
    five years$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Non-derivative financial liabilities:Bank loans and advances
    
    
    104
    
    
    
    104
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    Accounts payable and accrued liabilities
    
    
    586
    
    
    
    586
    
    
    
    586
    
    
    
    
    
    
    
    
    
    
    
    Revolving credit facility
    
    
    427
    
    
    
    484
    
    
    
    19
    
    
    
    19
    
    
    
    446
    
    
    
    Term credit facility
    
    
    100
    
    
    
    118
    
    
    
    5
    
    
    
    5
    
    
    
    108
    
    
    
    Unsecured senior notes
    
    
    1,129
    
    
    
    1,468
    
    
    
    81
    
    
    
    81
    
    
    
    1,306
    
    
    
    Capital lease obligations
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Other debts of subsidiaries
    
    
    15
    
    
    
    9
    
    
    
    2
    
    
    
    1
    
    
    
    2
    
    
    
    4Other debts without recourse to the Company
    
    
    47
    
    
    
    47
    
    
    
    34
    
    
    
    4
    
    
    
    9
    
    
    
    Legal settlement
    
    
    9
    
    
    
    9
    
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    Derivative instrument financial liabilities
    
    
    43
    
    
    
    43
    
    
    
    31
    
    
    
    9
    
    
    
    3
    
    
    
    2,461
    
    
    
    2,869
    
    
    
    866
    
    
    
    122
    
    
    
    1,877
    
    
    
    4
 41




---



##### 



2007Carrying
    
    
    Contractual
    
    
    Less than
    
    
    Between one
    
    
    Between two
    
    
    More thanamount
    
    
    cash flows
    
    
    one year
    
    
    and two years
    
    
    and five years
    
    
    five years$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Non-derivative financial liabilities:Bank loans and advances
    
    
    47
    
    
    
    47
    
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    Accounts payable and accrued liabilities
    
    
    572
    
    
    
    572
    
    
    
    572
    
    
    
    
    
    
    
    
    
    
    
    Revolving credit facility
    
    
    553
    
    
    
    676
    
    
    
    31
    
    
    
    31
    
    
    
    614
    
    
    
    Term credit facility
    
    
    100
    
    
    
    128
    
    
    
    6
    
    
    
    6
    
    
    
    116
    
    
    
    Unsecured senior notes
    
    
    914
    
    
    
    1,254
    
    
    
    66
    
    
    
    66
    
    
    
    195
    
    
    
    927Capital lease obligations
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Other debts
    
    
    17
    
    
    
    11
    
    
    
    2
    
    
    
    3
    
    
    
    2
    
    
    
    4Legal settlement
    
    
    11
    
    
    
    12
    
    
    
    3
    
    
    
    3
    
    
    
    6
    
    
    
    Derivative instrument financial liabilities
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2,217
    
    
    
    2,703
    
    
    
    729
    
    
    
    110
    
    
    
    933
    
    
    
    931
     2008
    
    
    2007Foreign currency translation of self-sustaining foreign subsidiaries,
net of hedging activities and net of related income tax of $42 million
(2007$40 million)
    
    
    141
    
    
    
    (49
    )Unrealized gains arising from foreign exchange forward contracts
designated as cash flow hedges, net of related income taxes of $25
million
(2007$(1.7) million)
    
    
    (57
    )
    
    
    4Unrealized gains arising from interest rate swap agreements
designated as cash flow hedges net of related income tax of $1.5
million
(2007$0.2 million)
    
    
    (2
    )
    
    
    Unrealized gains arising from commodity derivative financial
instruments designated as cash flow hedges, net of related income
taxes of $(3) million (2007$(1) million)
    
    
    3
    
    
    
    285
    
    
    
    (43
    )
 b)
    
    Change in foreign currency translation of self-sustaining foreign subsidiaries is as follows:
 2008
    
    
    2007
    
    
    2006BalanceBeginning of year
    
    
    (49
    )
    
    
    (9
    )
    
    
    (36
    )Effect of changes in exchange rates during the year:On net investment in self-sustaining foreign subsidiaries
    
    
    176
    
    
    
    (136
    )
    
    
    23On certain long-term debt denominated in foreign
currencies designated as a hedge of net investments in
self-sustaining foreign subsidiaries
    
    
    17
    
    
    
    116
    
    
    
    1Future income taxes on designated long-term debt
    
    
    (3
    )
    
    
    (20
    )
    
    
    Others
    
    
    
    
    
    
    
    
    
    
    3BalanceEnd of year
    
    
    141
    
    
    
    (49
    )
    
    
    (9
    )
 42




---



##### 



2008
    
    
    2007
    
    
    2006Joint ventures1Sales
    
    
    30
    
    
    
    23
    
    
    
    34Revenue from services
    
    
    5
    
    
    
    4
    
    
    
    12Purchases
    
    
    7
    
    
    
    2
    
    
    
    30Significantly influenced companiesSales
    
    
    74
    
    
    
    62
    
    
    
    35Purchases
    
    
    45
    
    
    
    38
    
    
    
    23Entity controlled by a related director of the Company2Purchases
    
    
    
    
    
    
    5
    
    
    
    7
 
 1.
    
    Represent the portion of transactions or balances not eliminated upon proportionate consolidation of the joint ventures.2.
    
    Since November 2007, this entity is no longer controlled by a related director of the Company.   2008
    
    
    2007Joint ventures1Accounts receivable
    
    
    6
    
    
    
    3Accounts payable
    
    
    2
    
    
    
    2Significantly influenced companiesAccounts receivable
    
    
    5
    
    
    
    6Accounts payable
    
    
    3
    
    
    
    3
 
 1.
    
    Represent the portion of transactions or balances not eliminated upon proportionate consolidation of the joint ventures.  a)
    
    On March 1, 2008, Reno De Medici S.p.A. (RdM), a public company based in Milan, Italy, and
the Company completed a transaction relating to the combination of RdM and the European
recycled cartonboard business of Cascades S.A. The transaction resulted in the Company
contributing its manufacturing assets of recycled boxboard located in Blendecques, France, and
Arnsberg, Germany, and its sheeting center in Wednesbury, U.K., having a net book value of $92
million (62 million) in exchange for 115.6 million or 30.6% of the outstanding shares of RdM
representing a contribution of $81 million (54 million) and a cash consideration adjustment
of $3.7 million (2.4 million). As of the date of transaction, the Companys share of the cash
and cash equivalents owned by RdM, net of the cash transferred from its assets, amounted to
$5.2 million (3 million). The Companys investment in RdM is proportionally consolidated
since that date as the Company and a group of current shareholders have joint control of RdM.
The Company recorded a loss of $5 million on this transaction. In addition the Company
acquired, on the open market, 9.6 million shares of RdM representing 2.6% of the outstanding
shares for a cash consideration of $4.2 million (2.7 million). The interests in joint
ventures include, in 2008, our share of the balance sheet, results and cash flow information
of RdM since March 1, 2008.
 43




---



##### 



b)
    
    The major components of the interests in joint ventures in the consolidated financial
statements are as follows:
 2008
    
    
    2007
    
    
    2006Consolidated balance sheetsCurrent assets
    
    
    148
    
    
    
    25
    
    
    
    33Long-term assets
    
    
    169
    
    
    
    27
    
    
    
    33Current liabilities
    
    
    144
    
    
    
    10
    
    
    
    9Long-term debt, net
    
    
    12
    
    
    
    1
    
    
    
    2Cash and cash equivalents at end of year
    
    
    5
    
    
    
    3
    
    
    
    5Total assets
    
    
    317
    
    
    
    52
    
    
    
    66Total debt1
    
    
    85
    
    
    
    4
    
    
    
    4Consolidated statements of earningsSales
    
    
    308
    
    
    
    86
    
    
    
    757Depreciation and amortization
    
    
    12
    
    
    
    3
    
    
    
    33Operating income
    
    
    7
    
    
    
    11
    
    
    
    89Financial expenses
    
    
    4
    
    
    
    
    
    
    
    14Net earnings (loss)
    
    
    (9
    )
    
    
    9
    
    
    
    25Consolidated statements of cash flowsOperating activities
    
    
    (3
    )
    
    
    4
    
    
    
    60Investing activities
    
    
    2
    
    
    
    (6
    )
    
    
    (26
    )Financing activities
    
    
    2
    
    
    
    
    
    
    
    (30
    )Additional informationDividends received by the Company from joint ventures
    
    
    5
    
    
    
    5
    
    
    
    22
 
 1.
    
    Includes bank loans and advances, current portion of long-term debt, and long-term debt.   1 U.S.
GAAP Accounting Pronouncements
 1.1
    
    Effective December 31, 2006, the Company adopted SFAS 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88,
106, and 132(R). This standard requires an employer to (i) recognize the overfunded or
underfunded status of a defined benefit plan as an asset or liability with changes in that
funded status recognized through comprehensive income; and (ii) measure the funded status of a
plan as of the year-end date. The impact of adopting SFAS 158 effective December 31, 2006 is
summarized in the table below. In accordance with the transition provision of the standard,
prior period financial statements were not restated.
 IncrementalBefore applying
    
    
    effect of applying
    
    
    After applyingSFAS 158
    
    
    SFAS 158
    
    
    SFAS 158Other assets, intangible assets and goodwill
    
    
    632
    
    
    
    (13
    )
    
    
    619Other liabilities
    
    
    165
    
    
    
    21
    
    
    
    186Future income taxes
    
    
    295
    
    
    
    (12
    )
    
    
    283Accumulated other comprehensive income
    
    
    (18
    )
    
    
    (22
    )
    
    
    (40
    )
 1.2
    
    In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157).
SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value measurements. SFAS
No. 157 applies under other accounting pronouncements that require or permit fair value
measurements, and therefore does not require any new fair value measurements. SFAS No. 157 is
effective for fiscal years beginning after November 15, 2007 (January 1, 2008 for the
Company). In February 2008, the FASB amended SFAS No. 157 to exclude leasing transactions and
to delay the effective date by one year for nonfinancial assets and liabilities that are
recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The
adoption of SFAS 157 as it relates to the Companys financial assets and liabilities,
effective as of January 1, 2008, did not have an impact on its results of operations or
financial position.
 44




---



##### 



SFAS No. 157 establishes a fair value hierarchy, which prioritizes the inputs to valuation
techniques used to measure fair value into three levels. A financial instruments
categorization within the fair value hierarchy is based upon the lowest level of input that is
available and significant to the fair value measurement. SFAS No. 157 establishes and
prioritizes three levels of inputs that may be used to measure fair value:
 
    
    Level 1Quoted prices in active markets for identical assets or liabilities.
    
    Level 2Observable inputs other than quoted prices in active markets for identical
assets and liabilities, quoted prices for identical or similar assets or liabilities in
inactive markets, or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities.
    
    Level 3Inputs that are generally unobservable and typically reflect managements
estimates of assumptions that market participants would use in pricing the asset or
liability.
   Quoted prices inactive markets
    
    
    
    
    
    
    Significantfor identical
    
    
    Significant
    
    
    unobservableDecember 31,
    
    
    assets
    
    
    observable inputs
    
    
    inputsDerivative financial instruments
    
    2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)AssetsHeld for trading investment in shares
    
    
    2
    (*)
    
    
    2Fair value of derivative financial assets
    
    
    13
    
    
    
    
    
    
    
    13
    (**)
    
    
    Total
    
    
    15
    
    
    
    2
    
    
    
    13
    
    
    
    LiabilitiesFair value of derivative financial liabilities
    
    
    43
    
    
    
    
    
    
    
    43
    (**)
    
    
    Total
    
    
    43
    
    
    
    
    
    
    
    43
    
    
    
    
 
 (*)
    
    The Company owns an investment in Junex, a company quoted on a Canadian stock market.(**)
    
    Derivative financial instruments include foreign exchange options and old corrugated containers, electricity and natural gas contracts. Fair
value measurements for the Companys derivatives are classified under Level 2 because such measurements are determined using published market
prices or estimated based on observable inputs such as interest rates, yield curves, spot and future exchange rates. 1.3
    
    In February 2007, the FASB published SFAS 159, The Fair Value Option for Financial Assets
and Financial Liabilitiesincluding an amendment of FASB Statement No. 115. This standard
permits entities to choose to measure many financial instruments and certain other assets and
liabilities at fair value on an instrument-by-instrument basis under a fair value option. This
new standard will be effective for fiscal years beginning after November 15, 2007. The company
chose not to make this fair value accounting election for any of its financial assets and
liabilities. Accordingly, any financial assets and liabilities within the scope of SFAS 159
will continue to be carried at their historical amortized cost basis, adjusted for other than
temporary impairments in value. As a result, the adoption of SFAS 159, effective as of January
1, 2008, did not have an impact on the Companys results of operations or financial position.1.4
    
    In May 2008, the FASB issued Statement No. 162, Hierarchy of Generally Accepted Accounting
Principles (SFAS 162). This Statement identifies the sources of accounting principles and
the framework for selecting the principles to be used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with US GAAP. SFAS 162
is effective on November 16, 2008, 60 days following the Securities and Exchange Commissions
approval of the Public Company Accounting Oversight Board amendments to AU Section 411 on
September 16, 2008, The Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles. As a result, the adoption of SFAS 162, effective as of January 1,
2008, did not have an impact on the Companys results of operations or financial position.1.5
    
    On October 10, 2008, the FASB issued FSP No. 157-3, Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active, which clarifies the application of SFAS
No. 157 in a market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the market for that
financial asset is not active. FSP 157-3 became effective on October 10, 2008, and its
adoption did not have a material impact on the Companys financial position or results of
operations.1.6
    
    In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS 141R),
included in FASB ASC 805, Business Combinations, which changed the accounting for business
acquisitions. SFAS 141R, as amended by FSP No. FAS 141-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination that Arise from Contingencies, issued in April
2009, requires the acquiring entity in a business combination to recognize all (and only) the
assets acquired and liabilities assumed in the transaction and establishes the
acquisition-date fair value as the measurement objective for all assets acquired and
liabilities assumed in a business combination. Certain provisions of this standard impact the
determination of acquisition-date fair value of consideration paid in a business combination
(including contingent consideration), exclude transaction costs from acquisition accounting
and change accounting practices for acquisition-related restructuring costs, in-process
research and development, indemnification assets and tax benefits. SFAS 141R, as amended, was
effective for business combinations and adjustments to an acquired entitys deferred tax asset
and liability balances occurring after December 31, 2008. This standard had no immediate
impact upon adoption, and will be applied to business combinations completed post-2008 and to
applicable adjustments to acquired entity deferred tax items occurring after December 31,
2008.1.7
    
    In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS 160, included
in FASB Accounting Standards Codification (ASC) 810, Consolidation. SFAS 160 established
new guidance governing the accounting for and reporting of noncontrolling interests (NCIs)
in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain
provisions of this standard indicate, among other things, that NCIs (previously referred to as
minority interests) be treated as a separate component of equity, not as a liability (as was
previously the case), that increases and decreases in the parents ownership interest that
leave control intact be treated as equity transactions, rather than as step acquisitions or
dilution gains or losses, and that losses of a partially owned consolidated subsidiary be
allocated to the NCI even when such allocation might result in a deficit balance. This
standard also required changes to certain presentation
 45




---



##### 



and disclosure requirements. The
Company adopted SFAS 160 effective as of January 1, 2009. The provisions of the standard were
applied to all NCIs prospectively, except for the presentation and disclosure requirements,
which were applied retrospectively to all periods presented. As a result, upon adoption, we
retroactively reclassified the Minority interests in subsidiaries balance previously
included in other liabilities to a new component of equity with respect to NCIs in
consolidated subsidiaries. The adoption also impacted certain captions previously used in our
Consolidated Statements of Earnings (loss), largely identifying net loss including NCI and net
loss attributable to the Company. Additional disclosures required by this standard are also
reflected in our Consolidated Statement of shareholders equity. The adoption of SFAS 160 did
not have an impact on our results of operations or financial position.1.8
    
    On January 1, 2009, the Company adopted SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities (SFAS 161), included in FASB ASC 815, Derivatives and
Hedging. This SFAS changes the disclosure requirements for derivative instruments and hedging
activities, requiring us to provide enhanced disclosures about (a) how and why we use
derivative instruments, (b) how derivative instruments and related hedged items are accounted
for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS
133) and (c) how derivative instruments and related hedged items affect our financial
position, financial performance and cash flows. The adoption of this accounting guidance did
not have an impact on our results of operations or financial position.1.9
    
    On January 1, 2009, the Company adopted FSP No. FAS 142-3, Determination of the Useful Life
of Intangible Assets (FSP 142-3), included in FASB ASC 350-30, General Intangibles Other
Than Goodwill. This FSP amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized intangible asset under
SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142). This new guidance also
provides additional disclosure requirements related to recognized intangible assets. The
adoption of this accounting guidance did not impact our results of operations or financial
position.1.10
    
    In June 2008, the FASB issued Staff Position No. EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP
EITF 03-6-1). This Staff Position states that unvested share-based payment awards that
contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid)
are participating securities and shall be included in the computation of earnings per share
pursuant to the two-class method. FSP EITF 03-6-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within those years.
All prior-period earnings per share (EPS) data presented shall be adjusted retrospectively
(including interim financial statements, summaries of earnings and selected financial data) to
conform with the provisions of this Staff Position. Early application is not permitted. The
adoption of this accounting guidance did not impact our results of operations or financial
position.1.11
    
    On January 1, 2009, the Company adopted EITF Issue No. 07-5, Determining Whether an
Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock (EITF 07-5), included
in FASB ASC 815, Derivatives and Hedging. This EITF Issue addresses the determination of
whether an instrument (or an embedded feature) is indexed to an entitys own stock, which is
the first part of the scope exception in paragraph 11(a) of SFAS 133. The adoption of this
accounting guidance did not change the classification or measurement of the Companys
financial statements.1.12
    
    On January 1, 2009, the Company adopted EITF Issue No. 08-3, Accounting by Lessees for
Nonrefundable Maintenance Deposits (EITF 08-3), included in FASB ASC 840, Leases. This
EITF Issue addresses the accounting for nonrefundable maintenance deposits paid by the lessee
to the lessor. The adoption of this accounting guidance did not impact our results of
operations or financial position.1.13
    
    On January 1, 2009, the Company adopted EITF Issue No. 08-6, Equity Method Investment
Accounting Considerations (EITF 08-6), included in FASB ASC 323, Investments  Equity
Method and Joint Ventures. This EITF Issue clarifies the accounting for certain transactions
and impairment considerations involving equity method investments. The adoption of this
accounting guidance did not impact our results of operations or financial position.1.14
    
    On January 1, 2009, the Company adopted FSP No. EITF 99-20-1, Amendments to the Impairment
Guidance of EITF Issue No. 99-20 (FSP 99-20-1), included in FASB ASC 325-40, Beneficial
Interests in Securitized Financial Assets. This FSP amends the impairment guidance in EITF
Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial
Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized
Financial Assets, to achieve consistency with the other-than-temporary impairment assessment
and related disclosure requirements used in SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities, and other related guidance. The adoption of this accounting
guidance did not impact our results of operations or financial position.1.15
    
    In February 2008, the FASB issued FSP FAS 157-2, which delayed the effective date of SFAS No.
157 for all nonrecurring fair value measurements of nonfinancial assets and liabilities until
fiscal years beginning after November 15, 2008. The Company adopted the provisions of this
statement with respect to its financial assets and liabilities that are measured at fair value
effective January 1, 2008. The Company adopted the provisions of SFAS No. 157 in respect of
its non-financial assets and liabilities effective January 1, 2009 in the preparation of the
accompanying unaudited interim consolidated financial statements. The adoption of this FSP had
no impact on the Companys financial position and results of operations.In October 2008, the FASB issued FSP FAS 157-3, which clarifies the application of SFAS No. 157
in cases where the market for the asset is not active. FSP FAS 157-3 is effective upon
issuance. The Company considered the guidance provided by the FSP in the preparation of the
accompanying unaudited interim consolidated financial statements. The adoption of this FSP had
no impact on the Companys financial position and results of operations.In April 2009, the FASB issued Staff Position (FSP) No. 157-4, Determining Fair Value When
the Volume and Level of Activity for the financial Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly. This FSP emphasizes that even if
there has been a significant decrease in the volume and level of activity for the asset or
liability and regardless of the valuation technique(s) used, the objective of a fair value
measurement remains the same. Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or
distressed sale) between market participants at the measurement date under current market
conditions. The FSP also provides guidance on indentifying transactions that are not orderly by
assessing certain factors among which are: an adequate marketing period for the asset or
liability, whether the seller is in a distressed state and whether the transaction price is an
outlier compared with recent transactions. The FSP finally amends the disclosure provisions of
SFAS No. 157 to require entities to disclose in interim and annual periods the inputs and
valuation technique(s) used to measure fair value. The adoption of this FSP had no impact on
the Companys financial position and results of operations.1.16
    
    In April 2009, the FASB issued Staff Position (FSP) FAS 115-2 and FAS 124-2, which provides a
new other-than-temporary impairment model for debt securities. This FSP was effective for
financial statements issued in fiscal years (and interim
 46




---



##### 



periods) ending after June 15, 2009. As the Company does
not hold any investments in debt securities, the application of the
requirements of this FSP did not have an impact on the
accompanying consolidated financial statements.1.17
    
    In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS No. 165). The objective
of SFAS No. 165 is to establish general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are issued or are
available to be issued. It requires the disclosure of the date through which an entity has
evaluated subsequent events and the basis for that date, that is, whether that date represents
the date of the financial statements were issued or were available to be issued. The Company
evaluates subsequent events through the date that the Companys financial statements are
issued, which is the date the Company files its unaudited interim financial statements in
SEDAR and furnishes them on Form 6-K with the Securities and Exchange Commission (SEC). The
Company adopted SFAS No. 165 in the quarter ended June 30, 2009.
 2 Reconciliation to United States generally accepted accounting principles (U.S. GAAP)
   Note
    
    
    2008
    
    
    2007
    
    
    2006Net earnings (loss) under Canadian GAAP (restated Note 2 c))
    
    
    
    
    
    
    (54
    )
    
    
    96
    
    
    
    4U.S. GAAP adjustments:Investment tax credit
    
    
    (b
    )
    
    
    (1
    )
    
    
    
    
    
    
    Gain realized on formation of Norampac
    
    
    (c
    )
    
    
    
    
    
    
    (4
    )
    
    
    (5
    )Change in fair value arising from foreign exchange forward contracts
    
    
    (d
    )
    
    
    
    
    
    
    
    
    
    
    (2
    )Change in fair value arising from commodity derivative financial
instruments
    
    
    (d
    )
    
    
    1
    
    
    
    
    
    
    
    (3
    )Inventory costs
    
    
    (e
    )
    
    
    (1
    )
    
    
    6
    
    
    
    Employee future benefits
    
    
    (f
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (1
    )Excess of redemption price of Class B preferred shares on their
paid-up capital
    
    
    (g
    )
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Tax effect on U.S. GAAP adjustments
    
    
    
    
    
    
    7
    
    
    
    (5
    )
    
    
    4Net earnings (loss) under U.S. GAAP
    
    
    
    
    
    
    (49
    )
    
    
    90
    
    
    
    (4
    )Net earnings (loss) under U.S. GAAP from continuing operations
    
    
    
    
    
    
    (67
    )
    
    
    109
    
    
    
    12Net earnings (loss) under U.S. GAAP from discontinued operations
    
    
    
    
    
    
    18
    
    
    
    (19
    )
    
    
    (16
    )(49
    )
    
    
    90
    
    
    
    (4
    )Basic net earnings (loss) under U.S. GAAP from continuing operations
per common share
    
    
    
    
    
    
    (0.67
    )
    
    
    1.10
    
    
    
    0.15Basic and diluted net earnings (loss) under U.S. GAAP per common share
    
    
    
    
    
    
    (0.49
    )
    
    
    0.91
    
    
    
    (0.05
    )
 47




---



##### 



2008(Restated
footnote (0))
    
    
    
    
    
    
    2007(Restated
footnote (0))
    
    
    
    
    
    
    2006(Restated
footnote (0))Number
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Numberof shares
    
    
    Amount
    
    
    of shares
    
    
    Amount
    
    
    of shares
    
    
    Amount$
    
    
    
    
    
    
    $
    
    
    
    
    
    
    $Common stockBalanceBeginning of year
    
    
    99,144,351
    
    
    
    502
    
    
    
    99,533,654
    
    
    
    503
    
    
    
    80,818,540
    
    
    
    259Shares issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,868,585
    
    
    
    250Shares issued on exercise of stock options
    
    
    
    
    
    
    
    
    
    
    103,397
    
    
    
    1
    
    
    
    131,229
    
    
    
    2Redemption of common shares
    
    
    (595,500
    )
    
    
    (3
    )
    
    
    (492,700
    )
    
    
    (2
    )
    
    
    (284,700
    )
    
    
    (1
    )Share issue costs, net of related income
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )BalanceEnd of year
    
    
    98,548,851
    
    
    
    499
    
    
    
    99,144,351
    
    
    
    502
    
    
    
    99,533,654
    
    
    
    503Adjustment relating to stock optionsBalanceBeginning of year
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    8Adjustment for the year
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2BalanceEnd of year
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    10Retained earningsBalanceBeginning of year
    
    
    
    
    
    
    762
    
    
    
    
    
    
    
    691
    
    
    
    
    
    
    
    711Net earnings (loss) for the year
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    (4
    )Dividend on common shares
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    (13
    )Excess of common share redemption price
over its paid-up capital
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )BalanceEnd of year
    
    
    
    
    
    
    696
    
    
    
    
    
    
    
    762
    
    
    
    
    
    
    
    691Accumulated other comprehensive incomeBalanceBeginning of year
    
    
    
    
    
    
    (79
    )
    
    
    
    
    
    
    (40
    )
    
    
    
    
    
    
    (51
    )Annual changesnet of tax
Foreign currency translation
    
    
    
    
    
    
    190
    
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    27Change in fair value of foreign
exchange forward contracts designated
as cash flow hedges
    
    
    
    
    
    
    (61
    )
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    Change in fair value of commodity
derivative financial instruments
designated as cash flow hedges
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (7
    )Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Unrecognized actuarial gains and
losses and past service costs on
defined benefit pension and other
benefit plans
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (22
    )Rounding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    BalanceEnd of year
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    (79
    )
    
    
    
    
    
    
    (40
    )Noncontrolling interests
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    19Rounding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    2Shareholders equityEnd of year
    
    
    
    
    
    
    1,269
    
    
    
    
    
    
    
    1,219
    
    
    
    
    
    
    
    1,185
 48




---



##### 



Note
    
    
    2008
    
    
    2007Shareholders equity under Canadian GAAP (restated Note 2c))
    
    
    
    
    
    
    1,256
    
    
    
    1,198U.S. GAAP adjustments:Investment tax credit
    
    
    (b
    )
    
    
    5
    
    
    
    6Gain realized on formation of Norampac
    
    
    (c
    )
    
    
    44
    
    
    
    44Unrealized gains arising from commodity derivative financial instruments
    
    
    (d
    )
    
    
    
    
    
    
    (1
    )Inventory costs
    
    
    (e
    )
    
    
    
    
    
    
    6Employee future benefits
    
    
    (f
    )
    
    
    (14
    )
    
    
    (13
    )Unrecognized actuarial gains and losses and past service costs on
defined benefit pension and other benefit plans
    
    
    (f
    )
    
    
    (67
    )
    
    
    (55
    )Tax effect on above adjustments
    
    
    
    
    
    
    16
    
    
    
    2Excess of redemption price of Class B preferred shares on their paid-up
capital net of related taxes
    
    
    (g
    )
    
    
    7
    
    
    
    7Noncontrolling interests
    
    
    (o
    )
    
    
    22
    
    
    
    25Shareholders equity under U.S. GAAP (Restated footnote (0))
    
    
    
    
    
    
    1,269
    
    
    
    1,219
  Note
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    2007Canadian
    
    
    
    
    
    
    
    
    
    
    U.S.
    
    

    Canadian
    
    
    U.S.GAAP
    
    
    
    
    
    
    
    
    
    

    GAAP

    
    
    GAAP
    
    
GAAPRestated
    
    
    
    
    
    
    RDM
    
    
    (Restated
    
    
    Restated
    
    
    (Restated(Note 2c))
    
    
    Adjustments
    
    
    impact (m)
    
    
    footnote (0))
    
    
    (Note 2c))
    
    
    footnote (0))Current assets
    
    
    
    (e)
    
    
    1,248
    
    
    
    
    
    
    
    (121
    )
    
    
    1,127
    
    
    
    1,204
    
    
    
    1,203Property, plant and equipment
    
    (b) (c) and (g)
    
    
    2,030
    
    
    
    33
    
    
    
    (110
    )
    
    
    1,953
    
    
    
    1,886
    
    
    
    1,925Intangible assets, other
assets and goodwill
    
    (1.1) (c) and  (d)
    
    
    753
    
    
    
    (40
    )
    
    
    57
    
    
    
    770
    
    
    
    678
    
    
    
    679Total assets
    
    
    
    
    
    
    4,031
    
    
    
    (7
    )
    
    
    (174
    )
    
    
    3,850
    
    
    
    3,768
    
    
    
    3,807Current liabilities
    
    
    
    
    
    
    726
    
    
    
    
    
    
    
    (138
    )
    
    
    588
    
    
    
    623
    
    
    
    623Long-term debt
    
    
    
    (d)
    
    
    1,672
    
    
    
    11
    
    
    
    (11
    )
    
    
    1,672
    
    
    
    1,570
    
    
    
    1,582(1.1) and (b) to (e)Other liabilities
    
    (g) and (o)
    
    
    377
    
    
    
    (31
    )
    
    
    (25
    )
    
    
    321
    
    
    
    377
    
    
    
    383Total liabilities
    
    
    
    
    
    
    2,775
    
    
    
    (20
    )
    
    
    (174
    )
    
    
    2,581
    
    
    
    2,570
    
    
    
    2,588(1.1) and (b) to (e)Shareholders equity
    
    (g) and (o)
    
    
    1,256
    
    
    
    13
    
    
    
    
    
    
    
    1,269
    
    
    
    1,198
    
    
    
    1,219
  Note
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2008Canadian GAAP
    
    
    
    
    
    
    
    
    U.S. GAAPRestated (Note
    
    
    
    
    
    
    
    
    (Restated2c))
    
    
    Adjustments
    
    
    RDM impact (m)
    
    
    footnote (0))Sales
    
    
    
    
    
    
    4,017
    
    
    
    
    
    
    
    (211
    )
    
    
    3,806Costs of sales and expenses
    
    
    (b) (e
    ) (l)
    
    
    4,001
    
    
    
    7
    
    
    
    (219
    )
    
    
    3,789Operating income from continuing operations
    
    
    
    
    
    
    16
    
    
    
    (7
    )
    
    
    8
    
    
    
    17Interest expense
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    (4
    )
    
    
    98Foreign exchange loss on long term debt
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    24(110
    )
    
    
    (7
    )
    
    
    12
    
    
    
    (105
    )Provision for income tax
    
    
    (b),(l)
    
    

    
    (32
    )
    
    
    (12
    )
    
    
    
    
    
    
    (44
    )Share of results of significant influence companies
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    12
    
    
    
    4Net earnings from discontinued operations
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    (18
    )Net loss including noncontrolling interests
    
    
    
    
    
    
    (52
    )
    
    
    5
    
    
    
    
    
    
    
    (47
    )Net loss attributable to noncontrolling interests
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Net loss attributable to Cascades inc.
    
    
    
    
    
    
    (54
    )
    
    
    5
    
    
    
    
    
    
    
    (49
    )
 49




---



##### 



Note
    
    
    
    
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    
    
    
    2006Canadian
    
    
    
    
    
    
    
    
    
    
    CanadianGAAP
    
    
    
    
    
    



    U.S.
    
    
    GAAP
    
    
    
    
    
    

    U.S.Restated
    
    
    
    
    
    
    GAAP
    
    
    Restated
    
    
    
    
    
    
    GAAP(Note 2c))
    
    
    Adjusments
    
    
    (Restated footnote (0))
    
    
    (Note 2c))
    
    
    Adjusments
    
    
 (Restated footnote (0))Sales
    
    
    
    
    
    
    3,929
    
    
    
    
    
    
    
    3,929
    
    
    
    3,278
    
    
    
    
    
    
    
    3278Costs of sales and expenses
    
    (b) (e) and (l)
    
    
    3,784
    
    
    
    18
    
    
    
    3,802
    
    
    
    3,181
    
    
    
    13
    
    
    
    3,194Operating income from
continuing operations
    
    
    
    
    
    
    145
    
    
    
    (18
    )
    
    
    127
    
    
    
    97
    
    
    
    (13
    )
    
    
    84Interest expense
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    102
    
    
    
    79
    
    
    
    
    
    
    
    79Foreign exchange gain on
long term debt
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    (18
    )
    
    
    84
    
    
    
    18
    
    
    
    (13
    )
    
    
    5Provision for income tax
    
    (b) and (l)
    
    
    11
    
    
    
    (12
    )
    
    
    (1
    )
    
    
    6
    
    
    
    (5
    )
    
    
    1Share of results of
significant influence
companies
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    27
    
    
    
    8
    
    
    
    
    
    
    
    8Net loss from discontinued
operations
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    19
    
    
    
    16
    
    
    
    
    
    
    
    16Net loss including
noncontrolling interests
    
    
    
    
    
    
    99
    
    
    
    (6
    )
    
    
    93
    
    
    
    4
    
    
    
    (8
    )
    
    
    (4
    )Net loss attributable to
noncontrolling interests
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Net loss attributable to
Cascades inc.
    
    
    
    
    
    
    96
    
    
    
    (6
    )
    
    
    90
    
    
    
    4
    
    
    
    (8
    )
    
    
    (4
    )
 
 2.6
    
    Main adjustments explanationsa)
    
    On January 1, 2009, the Company adopted new CICA handbook Section 3064 Goodwill and
Intangible assets, replacing CICA handbook Section 3062 Goodwill and other intangible
assets and Section 3450 Research and Development costs. Section 3064 was adopted
retroactively with restatement of prior periods. Previously, under Canadian GAAP, start-up costs were
deferred and amortized over a period not exceeding five years.
Previously, under U.S. GAAP, start-up costs
were accounted for under Statement of Position (SOP) No. 98-5, Reporting on the Costs of
Start-Up Activities, and were included in the statement of earnings in the period they were
incurred. As a result of the retroactive adoption of Section 3064,
this difference has been eliminated.b)
    
    Under U.S. GAAP, investment tax credits are accounted for as a tax
recovery. Under Canadian GAAP, investment tax credits are accounted
for as a reduction of the underlying investment.c)
    
    On December 30, 1997, the Company and Domtar Inc. merged their
respective containerboard and corrugated packaging operations to form
Norampac Inc., a 50-50 joint venture. Under Canadian GAAP, a portion
of the gain realized on the transaction of an original amount of
approximately $58 million, net of related taxes, was recorded against
property, plant and equipment and goodwill. Under U.S. GAAP, this gain
would have been recognized in earnings on December 30, 1997.
Therefore, an adjustment is required to adjust amortization expenses
recorded under Canadian GAAP. As disclosed in note 5(b), the Company
acquired the remaining outstanding common shares of Norampac on
December 29, 2006. Therefore since this date, the goodwill is not
amortized anymore and the difference recorded before became a
permanent difference. In addition, under U.S. GAAP, additional
liabilities have been included in the allocation of the purchase price
at the date of the transaction with respect to employee future
benefits with a corresponding adjustment to goodwill.d)
    
    In 2007, the Company adopted sections 1530, 3251, 3855 and 3865
(referred to as the Sections) of the CICA Handbook with respect to
measurement and recognition of financial instruments, hedges, equity
and comprehensive income. These Sections essentially harmonized
Canadian GAAP and U.S. GAAP except for the classification of deferred
financing costs. Under Canadian GAAP, those costs are added to the
carrying value of the related long-term debt. Under U.S. GAAP,
deferred financing costs are classified in other assets. As of
December 31, 2008 the reclassification of those costs amounted to $11
million ($12 million in 2007). With the exception of the latter, the
adjustment resulting from the adoption of these Sections effective
January 1, 2007 under Canadian GAAP had no impact on U.S. GAAP. Under
Canadian GAAP, prior to January 1, 2007, gains and losses were charged
to earnings in the same period as the respective hedged item affected
earnings.e)
    
    Prior to January 1, 2008, the cost of inventories under US GAAP
included, among other things, an allocation of the depreciation
expense on production equipment as well as other indirect costs. For
the year ended December 31, 2007, the Company recorded an amount of $6
million as cumulative adjustment relating to the allocation of such
costs as a component of inventory. Starting January 1, 2008, the
Company adopted, retroactively without restatements of prior periods,
Section 3031 of the CICA Handbook establishing new measurement
requirements which essentially harmonized Canadian and U.S. GAAP.f)
    
    Under U.S. GAAP in accordance with SFAS 158, the Company recognizes
the overfunded or underfunded status of its defined benefits plans as
an asset or liability with changes in that funded status recognized
through comprehensive income. Prior to the adoption of SFAS 158, a
minimum pension liability adjustment was recorded in accumulated other
comprehensive income for plans whose accumulated benefit obligation
exceeded the fair value of plan assets. The excess of its liability
over the intangible assets, which can also be recorded for the plan,
was recorded in comprehensive income. This adjustment is not required
under Canadian GAAP. Differences between Canadian and U.S. GAAP remain
with respect to the amortization of actuarial gains and losses arising
prior to January 1, 2000.g)
    
    In 2003, the Company redeemed all of the outstanding Class B preferred
shares of a subsidiary for a consideration of $16 million. Under
Canadian GAAP, the excess of the redemption price of $10 million over
the recorded capital was included in retained earnings. Under U.S.
GAAP, as these preferred shares represent a non-controlling interest,
the excess of $10 million would have been recorded as an increase of
$15 million to property, plant and equipment and an increase of 50




---



##### 



$5 million in future income tax liabilities. The adjustment of $15 million to
property, plant and equipment is amortized on a straight-line basis over a
period of 20 years. In addition, under U.S. GAAP, the premium paid on
redemption would be classified under investing activities rather than financing
activities.h)
    
    Under U.S. GAAP, financing charges incurred in 2006
amounting to $3 million would be classified under
operating activities rather than financing
activities.(2008nil, 2007nil)i)
    
    Under Canadian GAAP, costs related to share issuance
are presented in retained earnings, net of related
income taxes. Under U.S. GAAP, share issuance costs
(2008nil, 2007nil, 2006$7 million) are recorded
as a reduction of capital stock net of related income
taxes.j)
    
    Prior to January 1, 2007, the Companys financing
costs under Canadian GAAP were amortized on a
straight-line basis over the anticipated period of
repayment of the underlying debt. Under U.S. GAAP,
such costs are deferred and amortized using the
effective interest method. For the year ended
December 31, 2006, amortization expense under both
methods are not materially different. Starting January
1, 2007, the Company adopted Section 3855 of the CICA
Handbook prospectively. As a result of the
adoption of Section 3855, financing costs are included in the carrying value of the financial liability and amortized
using the effective interest method.k)
    
    Under Canadian GAAP, the Company accounts for its
deferred share unit plan using the intrinsic value
model. Under U.S. GAAP, the deferred share unit plan
is accounted for at fair value using a Black-Scholes
option pricing model. Both methods do no result in
materially different results for each of the years
presented.l)
    
    Under U.S. GAAP, income tax expense would be reduced
by $8 million in 2008 (2007$13 million; 2006$9
million) for tax credits relating to research and
development expenses, which are recognized as a
reduction of cost of sales under Canadian GAAP.m)
    
    Under Canadian GAAP, investments in joint ventures
are accounted for using the proportionate
consolidation method. Under U.S. GAAP, they are
accounted for using the equity method. The different
accounting treatments affect only the presentation
and classification of financial statement items and
not net earnings or shareholders equity. Rules
prescribed by the U.S. Securities and Exchange
Commission (SEC) permit the use of the
proportionate consolidation method in the
reconciliation to U.S. GAAP provided the joint
venture is an operating entity and the significant
financial operating policies are, by contractual
arrangement, jointly controlled by all parties having
an equity interest in the joint venture. As required,
the Company discloses in note 22 the major components
of its financial statements resulting from the use of
the proportionate consolidation method to account for
its interests in joint ventures. For RDM, the
exemption is not possible, therefore for
reconciliation purposes the joint venture has been
accounted for under the equity method. The impacts
are disclosed in the column RDM Impact. For the other
joint ventures, the exemption applies and even under
US GAAP they remain consolidated with the
proportionate method.n)
    
    Under US GAAP, the consolidated cash flows would not
be significantly different from the presentation
under Canadian GAAP, except that RDM would be shown
as an equity investment and not proportionally
consolidated. In addition, some total in operating
activities under Canadian GAAP would not be presented
under U.S. GAAP.o)
    
    On January 1, 2009, under U.S. GAAP, the Company
retroactively adopted the presentation and disclosure requirements of SFAS 160
Consolidation. SFAS 160 requires that NCI be
presented as a component of shareholders equity. As
a result, NCI were reclassified from other
liabilities to shareholders equity for all periods presented in
this U.S. GAAP reconciliation. Under Canadian
GAAP, NCI continues to be presented in other liabilities.p)
    
    Under Canadian GAAP, an investor should present and disclose its proportionate share of
discontinued operations of an investment accounted under the equity method in its financial
statement according to their nature. Under U.S. GAAP, discontinued operation of an investee is
not separately presented in the investors financial statement. 3 Recent accounting pronouncements under U.S. GAAP not yet adopted
 3.1
    
    In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets
(SFAS No. 166), which amends the derecognition guidance in SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Some of the
major changes undertaken by SFAS No. 166 include:Eliminating the concept of a Qualified Special Purpose Entity (QSPE) since the FASB believes,
on the basis of recent experience, that many entities that have been accounted for as QSPEs are
not truly passive, a belief that challenges the premise on which the QSPE exception was based.Modifying the derecognition provisions in SFAS No. 140. Specifically, SFAS No. 166 aimed to:
 
    
    require that all arrangements made in connection with a transfer of financial assets be
considered in the derecognition analysis,
    
    clarify when a transferred asset is considered legally isolated from the transferor,
    
    modify the requirements related to a transferees ability to freely pledge or exchange
transferred financial assets, and
    
    provide guidance on when a portion of a financial asset can be derecognized, thereby
restricting the circumstances when sale accounting can be achieved to the following cases:
    
    transfers of individual or groups of financial assets in their entirety and
    
    transfers of participating interests
 SFAS No. 166 is effective for financial asset transfers occurring after the beginning of an
entitys first fiscal year that begins after November 15, 2009. The Company will assess the
impact of adopting this Statement on its consolidated financial statements.3.2
    
    In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement
No. 162 (SFAS 168), included in FASB ASC 105, Generally Accepted Accounting Principles.
SFAS 168 defines the new hierarchy for U.S. GAAP and explains how the FASB will use its ASC as
the sole source for all authoritative guidance and replaces SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles, which was issued in May 2008. SFAS 168 becomes
effective for us beginning with our unaudited interim consolidated financial statements for
the quarter ended September 30, 2009. Since SFAS 168 relates to disclosures only, the adoption
of this accounting guidance will not impact our results of operations or financial position.
However, because the codification completely replaces existing standards, it will affect the
way U.S. GAAP is referenced within the consolidated financial statements and accounting
policies.For reporting purposes, the Codification will be effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The Company plans to adopt the
codification in the quarter ended September 30, 2009.
 51




---



##### 



3.3
    
    In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R)
(SFAS 167), included in FASB ASC 810, Consolidation, which is a revision to FASB
Interpretation No. 46(R), Consolidation of Variable Interest Entities (FIN 46(R)). SFAS
167 changes how a company determines when an entity that is insufficiently capitalized or is
not controlled through voting (or similar rights) should be consolidated. Qualified
special-purpose entities (QSPEs) will no longer be excepted from the FIN 46(R) guidance. The
determination of whether a company is required to consolidate an entity is based on, among
other things, an entitys purpose and design and a companys ability to direct the activities
of the entity that most significantly impact the entitys economic performance. SFAS 167
becomes effective for us on January 1, 2010. The Company will assess the impact of adopting
this Statement on its consolidated financial statements.3.4
    
    In December 2008, the FASB issued FSP FAS 132(R)-1 which amends Statement 132(R) to require
more detailed disclosures about employers plan assets, including employers investment
strategies, major categories of plan assets, concentrations of risk within plan assets, and
valuation techniques used to measure the fair value of plan assets. The disclosures required
by this FSP must be provided in the financial statements for fiscal years ending after
December 15, 2009. The Company will assess the impact of adopting this guidance on its
consolidated financial statements.
 4 Additional disclosures required by US GAAP
       2008
    
    
    2007Prior year service cost
    
    
    (24
    )
    
    
    (23
    )Accumulated gain (loss)
    
    
    (44
    )
    
    
    (32
    )Accumulated other comprehensive income (loss)
    
    
    (68
    )
    
    
    (55
    )
  2008
    
    
    2007Prior year service cost
    
    
    (2
    )
    
    
    (4
    )Amortization of prior year service cost
    
    
    2
    
    
    
    2Net gain (loss)
    
    
    (14
    )
    
    
    (3
    )Amortization of net actuarial loss
    
    
    2
    
    
    
    2Net amount recognized in other comprehensive income (pre-tax)
    
    
    (12
    )
    
    
    (3
    )
    52




---



##### 



2008OtherCanada
    
    
    countries
    
    
    TotalNet earnings from continuing operations
before provision for income taxes, share
of results of significantly influenced
companies and share of earnings
attributed to non-controlling interests
    
    
    (124
    )
    
    
    13
    
    
    
    (111
    )Provision for income taxesCurrent
    
    
    7
    
    
    
    13
    
    
    
    20Future
    
    
    (49
    )
    
    
    (3
    )
    
    
    (52
    )Net earnings from continuing operations
before share of results of significantly
influenced companies and share of
earnings attributed to non-controlling
interests
    
    
    (84
    )
    
    
    5
    
    
    
    (79
    )
 2007Restated(Note 2c))OtherCanada
    
    
    countries
    
    
    TotalNet earnings (loss) from continuing
operations before provision for
income taxes, share of results of
significantly influenced companies
and share of earnings attributed to
non-controlling interests
    
    
    13
    
    
    
    88
    
    
    
    101Provision for income taxesCurrent
    
    
    6
    
    
    
    27
    
    
    
    33Future
    
    
    (4
    )
    
    
    (2
    )
    
    
    (6
    )Decrease in future income taxes
resulting from a substantively
charted change in tax rates
    
    
    (16
    )
    
    
    
    
    
    
    (16
    )Net earnings from continuing
operations before share of results
of significantly influenced
companies and share of earnings
attributed to non-controlling
interests
    
    
    27
    
    
    
    63
    
    
    
    90
 2006Restated(Note 2c))OtherCanada
    
    
    countries
    
    
    TotalNet earnings (loss) from
continuing operations before
provision for income taxes,
share of results of
significantly influenced
companies and share of
earnings attributed to
non-controlling interests
    
    
    (57
    )
    
    
    74
    
    
    
    17Provision for income taxesCurrent
    
    
    6
    
    
    
    28
    
    
    
    34Future
    
    
    (19
    )
    
    
    (6
    )
    
    
    (25
    )Decrease in future income
taxes resulting from a
substantively charted
change in tax rates
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Net earnings from continuing
operations before share of
results of significantly
influenced companies and share
of earnings attributed to
non-controlling interests
    
    
    (41
    )
    
    
    52
    
    
    
    11
 53




---



##### 



2008
    
    
    2007Accounts receivable
    
    
    565
    
    
    
    529Provision for doubtful accounts
    
    
    (30
    )
    
    
    (16
    )Accounts receivable from related companies
    
    
    7
    
    
    
    4Other accounts receivable
    
    
    52
    
    
    
    56Future income tax asset
    
    
    12
    
    
    
    4Income tax receivable
    
    
    32
    
    
    
    18Prepaid expenses
    
    
    18
    
    
    
    18Other
    
    
    1
    
    
    
    11657
    
    
    
    624
  2008
    
    
    2007Accounts payable
    
    
    425
    
    
    
    404Accounts payable to related companies
    
    
    3
    
    
    
    2Salaries and benefits payable
    
    
    81
    
    
    
    84Interest payable
    
    
    25
    
    
    
    20Income taxes payable on benefit
    
    
    2
    
    
    
    9Capital expenses included in accounts payable
    
    
    14
    
    
    
    17Other
    
    
    37
    
    
    
    36587
    
    
    
    572
  2008
    
    
    2007
    
    
    2006Payment on operating lease, including rent of building
    
    
    37
    
    
    
    45
    
    
    
    34Payment on capital lease
    
    
    2
    
    
    
    5
    
    
    
    5Loss (gain) on foreign currencyRealized
    
    
    (11
    )
    
    
    15
    
    
    
    (2
    )Unrealized
    
    
    (1
    )
    
    
    (11
    )
    
    
    2
  2008Balanceat the
    
    
    Additions
    
    
    
    
    
    
    Balancebeginning
    
    
    Charged
    
    
    
    
    
    
    at the endof the period
    
    
    to expenses
    
    
    Deductions
    
    
    of the periodProvision for doubtful accounts
    
    
    16
    
    
    
    17
    
    
    
    (3
    )
    
    
    30Provision for obsolete inventory
    
    
    16
    
    
    
    
    
    
    
    (4
    )
    
    
    12Valuation allowance for tax purposes(1)
    
    
    44
    
    
    
    40
    
    
    
    
    
    
    
    84
 2007Balanceat the
    
    
    Additions
    
    
    
    
    
    
    Balancebeginning
    
    
    Charged
    
    
    
    
    
    
    at the endof the period
    
    
    to expenses
    
    
    Deductions
    
    
    of the periodProvision for doubtful accounts
    
    
    13
    
    
    
    8
    
    
    
    (5
    )
    
    
    16Provision for obsolete inventory
    
    
    10
    
    
    
    6
    
    
    
    
    
    
    
    16Valuation allowance for tax purposes(1)
    
    
    21
    
    
    
    23
    
    
    
    
    
    
    
    44
 54




---



##### 



2006Balanceat the
    
    
    Additions
    
    
    
    
    
    
    Balancebeginning
    
    
    Charged
    
    
    
    
    
    
    at the endof the period
    
    
    to expenses
    
    
    Deductions
    
    
    of the periodProvision for doubtful accounts
    
    
    12
    
    
    
    4
    
    
    
    (3
    )
    
    
    13Provision for obsolete inventory
    
    
    18
    
    
    
    
    
    
    
    (8
    )
    
    
    10Valuation allowance for tax purposes(1)
    
    
    14
    
    
    
    7
    
    
    
    
    
    
    
    21
 
 (1)
    
    The deductions in the valuation allowance for tax purposes.  Shipping and handling costs
  Planned major maintenance
  5 Supplemental condensed consolidating financial information
  55




---



##### 



2008Restated(Note 2c))Parent
    
    
    Subsidiary
    
    
    Non-guarantor
    
    
    EliminationCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    adjustments
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $AssetsCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    3
    
    
    
    8
    
    
    
    
    
    
    
    11Accounts receivable
    
    
    101
    
    
    
    485
    
    
    
    210
    
    
    
    (139
    )
    
    
    657Inventories
    
    
    
    
    
    
    459
    
    
    
    122
    
    
    
    (1
    )
    
    
    580101
    
    
    
    947
    
    
    
    340
    
    
    
    (140
    )
    
    
    1,248Property, plant and equipment
    
    
    
    
    
    
    1,711
    
    
    
    314
    
    
    
    5
    
    
    
    2,030Intangible assets
    
    
    
    
    
    
    121
    
    
    
    28
    
    
    
    
    
    
    
    149Other assets
    
    
    2,973
    
    
    
    659
    
    
    
    248
    
    
    
    (3,597
    )
    
    
    283Goodwill
    
    
    
    
    
    
    309
    
    
    
    6
    
    
    
    6
    
    
    
    3213,074
    
    
    
    3,747
    
    
    
    936
    
    
    
    (3,726
    )
    
    
    4,031Liabilities and Shareholders EquityCurrent liabilitiesBank loans and advances
    
    
    
    
    
    
    44
    
    
    
    60
    
    
    
    
    
    
    
    104Accounts payable and accrued liabilities
    
    
    29
    
    
    
    511
    
    
    
    183
    
    
    
    (137
    )
    
    
    586Current portion of long-term debt
    
    
    
    
    
    
    2
    
    
    
    34
    
    
    
    
    
    
    
    3629
    
    
    
    557
    
    
    
    277
    
    
    
    (137
    )
    
    
    726Long-term debt
    
    
    1,745
    
    
    
    1,799
    
    
    
    319
    
    
    
    (2,191
    )
    
    
    1,672Other liabilities
    
    
    44
    
    
    
    263
    
    
    
    21
    
    
    
    49
    
    
    
    3771,818
    
    
    
    2,619
    
    
    
    617
    
    
    
    (2,279
    )
    
    
    2,775Shareholders equityCapital stock
    
    
    515
    
    
    
    1,049
    
    
    
    129
    
    
    
    (1,178
    )
    
    
    515Retained earnings
    
    
    656
    
    
    
    16
    
    
    
    182
    
    
    
    (198
    )
    
    
    656Accumulated other comprehensive income (loss)
    
    
    85
    
    
    
    63
    
    
    
    8
    
    
    
    (71
    )
    
    
    851,256
    
    
    
    1,128
    
    
    
    319
    
    
    
    (1,447
    )
    
    
    1,2563,074
    
    
    
    3,747
    
    
    
    936
    
    
    
    (3,726
    )
    
    
    4,031
 56




---



##### 



2007Restated(Note 2c))Parent
    
    
    Subsidiary
    
    
    Non-guarantor
    
    
    EliminationCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    adjustments
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $AssetsCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    7
    
    
    
    18
    
    
    
    
    
    
    
    25Accounts receivable
    
    
    4
    
    
    
    494
    
    
    
    194
    
    
    
    (68
    )
    
    
    624Inventories
    
    
    
    
    
    
    435
    
    
    
    120
    
    
    
    
    
    
    
    5554
    
    
    
    936
    
    
    
    332
    
    
    
    (68
    )
    
    
    1,204Property, plant and equipment
    
    
    
    
    
    
    1,647
    
    
    
    232
    
    
    
    7
    
    
    
    1,886Intangible assets
    
    
    
    
    
    
    124
    
    
    
    6
    
    
    
    
    
    
    
    130Other assets
    
    
    2,752
    
    
    
    841
    
    
    
    171
    
    
    
    (3,528
    )
    
    
    236Goodwill
    
    
    
    
    
    
    300
    
    
    
    5
    
    
    
    7
    
    
    
    3122,756
    
    
    
    3,848
    
    
    
    746
    
    
    
    (3,582
    )
    
    
    3,768Liabilities and Shareholders EquityCurrent liabilitiesBank loans and advances
    
    
    
    
    
    
    45
    
    
    
    2
    
    
    
    
    
    
    
    47Accounts payable and accrued liabilities
    
    
    33
    
    
    
    410
    
    
    
    194
    
    
    
    (65
    )
    
    
    572Current portion of long-term debt
    
    
    
    
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    433
    
    
    
    458
    
    
    
    197
    
    
    
    (65
    )
    
    
    623Long-term debt
    
    
    1,445
    
    
    
    1,976
    
    
    
    241
    
    
    
    (2,092
    )
    
    
    1,570Other liabilities
    
    
    80
    
    
    
    259
    
    
    
    13
    
    
    
    25
    
    
    
    3771,558
    
    
    
    2,693
    
    
    
    451
    
    
    
    (2,132
    )
    
    
    2,570Shareholders equityCapital stock
    
    
    517
    
    
    
    1,184
    
    
    
    113
    
    
    
    (1,297
    )
    
    
    517Retained earnings
    
    
    724
    
    
    
    76
    
    
    
    198
    
    
    
    (274
    )
    
    
    724Accumulated other comprehensive income (loss)
    
    
    (43
    )
    
    
    (105
    )
    
    
    (16
    )
    
    
    121
    
    
    
    (43
    )1,198
    
    
    
    1,155
    
    
    
    295
    
    
    
    (1,450
    )
    
    
    1,1982,756
    
    
    
    3,848
    
    
    
    746
    
    
    
    (3,582
    )
    
    
    3,768
 57




---



##### 



2008Parent
    
    
    Subsidiary
    
    
    Non-guarantor
    
    
    EliminationCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    adjustments
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Sales
    
    
    
    
    
    
    3,166
    
    
    
    967
    
    
    
    (116
    )
    
    
    4,017Cost of sales and expensesCost of sales (excluding depreciation and amortization)
    
    
    7
    
    
    
    2,586
    
    
    
    849
    
    
    
    (119
    )
    
    
    3,323Depreciation and amortization
    
    
    
    
    
    
    181
    
    
    
    32
    
    
    
    
    
    
    
    213Selling and administrative expenses
    
    
    2
    
    
    
    314
    
    
    
    73
    
    
    
    
    
    
    
    389Loss on disposal and other
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Impairment and other restructuring costs
    
    
    
    
    
    
    37
    
    
    
    6
    
    
    
    
    
    
    
    43Loss on financial instruments
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    289
    
    
    
    3,146
    
    
    
    965
    
    
    
    (119
    )
    
    
    4,001Operating income from continuing operations
    
    
    (9
    )
    
    
    20
    
    
    
    2
    
    
    
    3
    
    
    
    16Interest expense
    
    
    (19
    )
    
    
    132
    
    
    
    (11
    )
    
    
    
    
    
    
    102Foreign exchange loss on long-term debt
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24(14
    )
    
    
    (112
    )
    
    
    13
    
    
    
    3
    
    
    
    (110
    )Provision for (recovery of) income taxes
    
    
    (40
    )
    
    
    (29
    )
    
    
    8
    
    
    
    29
    
    
    
    (32
    )Share of results of significantly influenced companies and dilution gain
    
    
    98
    
    
    
    
    
    
    
    1
    
    
    
    (107
    )
    
    
    (8
    )Non controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Net earnings (loss) from continuing operations
    
    
    (72
    )
    
    
    (83
    )
    
    
    4
    
    
    
    79
    
    
    
    (72
    )Net earnings from discontinued operations
    
    
    18
    
    
    
    18
    
    
    
    20
    
    
    
    (38
    )
    
    
    18Net earnings (loss) for the year
    
    
    (54
    )
    
    
    (65
    )
    
    
    24
    
    
    
    41
    
    
    
    (54
    )
 58




---



##### 



2007Restated(Note 2c))Parent
    
    
    Subsidiary
    
    
    Non-guarantor
    
    
    EliminationCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    adjustments
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Sales
    
    
    
    
    
    
    3,127
    
    
    
    933
    
    
    
    (131
    )
    
    
    3,929Cost of sales and expensesCost of sales (excluding depreciation and amortization)
    
    
    6
    
    
    
    2,554
    
    
    
    772
    
    
    
    (131
    )
    
    
    3,201Depreciation and amortization
    
    
    
    
    
    
    181
    
    
    
    26
    
    
    
    
    
    
    
    207Selling and administrative expenses
    
    
    3
    
    
    
    317
    
    
    
    70
    
    
    
    
    
    
    
    390Gains on disposal and other
    
    
    (1
    )
    
    
    (17
    )
    
    
    
    
    
    
    1
    
    
    
    (17
    )Impairment and other restructuring costs
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Gain on financial instruments
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    (6
    )8
    
    
    
    3,038
    
    
    
    868
    
    
    
    (130
    )
    
    
    3,784Operating income from continuing operations
    
    
    (8
    )
    
    
    89
    
    
    
    65
    
    
    
    (1
    )
    
    
    145Interest expense
    
    
    (12
    )
    
    
    135
    
    
    
    (21
    )
    
    
    
    
    
    
    102Foreign exchange gain on long-term debt
    
    
    (59
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59
    )63
    
    
    
    (46
    )
    
    
    86
    
    
    
    (1
    )
    
    
    102Provision for (recovery of) income taxes
    
    
    9
    
    
    
    (13
    )
    
    
    13
    
    
    
    2
    
    
    
    11Share of results of significantly influenced companies and dilution gain
    
    
    (61
    )
    
    
    (58
    )
    
    
    
    
    
    
    92
    
    
    
    (27
    )Non controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3Net earnings from continuing operations
    
    
    115
    
    
    
    25
    
    
    
    73
    
    
    
    (98
    )
    
    
    115Net loss from discontinued operations
    
    
    (19
    )
    
    
    (15
    )
    
    
    (4
    )
    
    
    19
    
    
    
    (19
    )Net earnings (loss) for the year
    
    
    96
    
    
    
    10
    
    
    
    69
    
    
    
    (79
    )
    
    
    96
 59




---



##### 



2006Restated(Note 2c))Parent
    
    
    Subsidiary
    
    
    Non-guarantor
    
    
    EliminationCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    adjustments
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Sales
    
    
    
    
    
    
    2,597
    
    
    
    725
    
    
    
    (44
    )
    
    
    3,278Cost of sales and expensesCost of sales (excluding depreciation and amortization)
    
    
    1
    
    
    
    2,085
    
    
    
    614
    
    
    
    (43
    )
    
    
    2,657Depreciation and amortization
    
    
    
    
    
    
    139
    
    
    
    21
    
    
    
    
    
    
    
    160Selling and administrative expenses
    
    
    2
    
    
    
    239
    
    
    
    56
    
    
    
    7
    
    
    
    304Losses (gains) on disposal and other
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )Impairment and other restructuring costs
    
    
    
    
    
    
    58
    
    
    
    9
    
    
    
    
    
    
    
    67Loss (gain) on financial instruments
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )3
    
    
    
    2,514
    
    
    
    700
    
    
    
    (36
    )
    
    
    3,181Operating income from continuing operations
    
    
    (3
    )
    
    
    83
    
    
    
    25
    
    
    
    (8
    )
    
    
    97Interest expense
    
    
    1
    
    
    
    100
    
    
    
    (22
    )
    
    
    
    
    
    
    79(4
    )
    
    
    (17
    )
    
    
    47
    
    
    
    (8
    )
    
    
    18Provision for (recovery of) income taxes
    
    
    (3
    )
    
    
    4
    
    
    
    5
    
    
    
    
    
    
    
    6Share of results of significantly influenced companies and dilution gain
    
    
    (21
    )
    
    
    1
    
    
    
    
    
    
    
    12
    
    
    
    (8
    )Net earnings (loss) from continuing operations
    
    
    20
    
    
    
    (22
    )
    
    
    42
    
    
    
    (20
    )
    
    
    20Net earnings (loss) from discontinued operations
    
    
    (16
    )
    
    
    (18
    )
    
    
    2
    
    
    
    16
    
    
    
    (16
    )Net earnings (loss) for the year
    
    
    4
    
    
    
    (40
    )
    
    
    44
    
    
    
    (4
    )
    
    
    4
 60




---



##### 



2008Parent
    
    
    Subsidiary
    
    
    Non-guarantor
    
    
    EliminationCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    adjustments
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Operating activities from continuing operationsNet earnings (loss) for the year
    
    
    (54
    )
    
    
    (65
    )
    
    
    24
    
    
    
    41
    
    
    
    (54
    )Net earnings from discontinued operations
    
    
    (18
    )
    
    
    (18
    )
    
    
    (20
    )
    
    
    38
    
    
    
    (18
    )Net earnings (loss) from continuing operations
    
    
    (72
    )
    
    
    (83
    )
    
    
    4
    
    
    
    79
    
    
    
    (72
    )Adjustments forDepreciation and amortization
    
    
    
    
    
    
    181
    
    
    
    32
    
    
    
    
    
    
    
    213Loss on disposal and other
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Impairment and other restructuring costs
    
    
    
    
    
    
    17
    
    
    
    1
    
    
    
    (2
    )
    
    
    16Unrealized loss on financial instruments
    
    
    
    
    
    
    26
    
    
    
    1
    
    
    
    
    
    
    
    27Foreign exchange loss on long-term debt
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Future income taxes
    
    
    (11
    )
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    (52
    )Share of results of significantly influenced companies and dilution gain
    
    
    98
    
    
    
    
    
    
    
    1
    
    
    
    (107
    )
    
    
    (8
    )Non controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Others
    
    
    12
    
    
    
    5
    
    
    
    (44
    )
    
    
    16
    
    
    
    (11
    )Early settlement of natural gaz contracts
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    1151
    
    
    
    116
    
    
    
    
    
    
    
    (12
    )
    
    
    155Changes in non-cash working capital components
    
    
    (101
    )
    
    
    81
    
    
    
    (14
    )
    
    
    3
    
    
    
    (31
    )(50
    )
    
    
    197
    
    
    
    (14
    )
    
    
    (9
    )
    
    
    124Investing activities from continuing operationsPurchases of property, plant and equipment
    
    
    
    
    
    
    (137
    )
    
    
    (49
    )
    
    
    2
    
    
    
    (184
    )Proceeds from disposal of property, plant and equipment
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    (5
    )
    
    
    5Decrease (increase) in other assets
    
    
    (13
    )
    
    
    41
    
    
    
    28
    
    
    
    (60
    )
    
    
    (4
    )Cash of a joint venture and business acquisitions
    
    
    1
    
    
    
    
    
    
    
    5
    
    
    
    (1
    )
    
    
    5(12
    )
    
    
    (86
    )
    
    
    (16
    )
    
    
    (64
    )
    
    
    (178
    )Financing activities from continuing operationsBank loans and advances
    
    
    
    
    
    
    (4
    )
    
    
    26
    
    
    
    (2
    )
    
    
    20Change in revolving credit facilities
    
    
    (66
    )
    
    
    (70
    )
    
    
    22
    
    
    
    (35
    )
    
    
    (149
    )Increase in other long-term debt
    
    
    
    
    
    
    2
    
    
    
    9
    
    
    
    (9
    )
    
    
    2Payments of other long-term debt
    
    
    (2
    )
    
    
    (29
    )
    
    
    (58
    )
    
    
    82
    
    
    
    (7
    )Early settlement of foreign exchange contracts
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150Dividend paid to a non controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Redemption of common shares
    
    
    (4
    )
    
    
    (16
    )
    
    
    
    
    
    
    16
    
    
    
    (4
    )Dividends
    
    
    (16
    )
    
    
    (1
    )
    
    
    (25
    )
    
    
    26
    
    
    
    (16
    )62
    
    
    
    (118
    )
    
    
    (26
    )
    
    
    73
    
    
    
    (9
    )Change in cash and cash equivalents during the year from continuing
operations
    
    
    
    
    
    
    (7
    )
    
    
    (56
    )
    
    
    
    
    
    
    (63
    )Change in cash and cash equivalents from discontinued operations,
including proceeds on disposal
    
    
    
    
    
    
    9
    
    
    
    41
    
    
    
    
    
    
    
    50Net change in cash and cash equivalents during the year
    
    
    
    
    
    
    2
    
    
    
    (15
    )
    
    
    
    
    
    
    (13
    )Translation adjustments on cash and cash equivalents
    
    
    
    
    
    
    (6
    )
    
    
    5
    
    
    
    
    
    
    
    (1
    )Cash and cash equivalentsBeginning of year
    
    
    
    
    
    
    7
    
    
    
    18
    
    
    
    
    
    
    
    25Cash and cash equivalentsEnd of year
    
    
    
    
    
    
    3
    
    
    
    8
    
    
    
    
    
    
    
    11
 61




---



##### 



2007Restated(Note 2c))Parent
    
    
    Subsidiary
    
    
    Non-guarantor
    
    
    EliminationCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    adjustments
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Operating activities from continuing operationsNet earnings for the year
    
    
    96
    
    
    
    10
    
    
    
    69
    
    
    
    (79
    )
    
    
    96Net loss from discontinued operations
    
    
    19
    
    
    
    15
    
    
    
    4
    
    
    
    (19
    )
    
    
    19Net earnings (loss) from continuing operations
    
    
    115
    
    
    
    25
    
    
    
    73
    
    
    
    (98
    )
    
    
    115Adjustments forDepreciation and amortization
    
    
    
    
    
    
    181
    
    
    
    26
    
    
    
    
    
    
    
    207Losses (gains) on disposal and other
    
    
    (2
    )
    
    
    (28
    )
    
    
    
    
    
    
    1
    
    
    
    (29
    )Impairment and other restructuring costs
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Foreign exchange loss (gain) on long-term debt
    
    
    (59
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59
    )Future income taxes
    
    
    9
    
    
    
    (31
    )
    
    
    (3
    )
    
    
    3
    
    
    
    (22
    )Share of results of significantly influenced companies and dilution gain
    
    
    (61
    )
    
    
    (58
    )
    
    
    
    
    
    
    92
    
    
    
    (27
    )Non controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3Others
    
    
    17
    
    
    
    (1
    )
    
    
    (35
    )
    
    
    6
    
    
    
    (13
    )19
    
    
    
    91
    
    
    
    61
    
    
    
    7
    
    
    
    178Changes in non-cash working capital components
    
    
    (55
    )
    
    
    (26
    )
    
    
    1
    
    
    
    (9
    )
    
    
    (89
    )(36
    )
    
    
    65
    
    
    
    62
    
    
    
    (2
    )
    
    
    89Investing activities from continuing operationsPurchases of property, plant and equipment
    
    
    
    
    
    
    (143
    )
    
    
    (28
    )
    
    
    4
    
    
    
    (167
    )Proceeds from disposal of property, plant and equipment
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7Decrease (increase) in other assets
    
    
    (47
    )
    
    
    90
    
    
    
    39
    
    
    
    (85
    )
    
    
    (3
    )Business acquisitions
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )Business disposals, net of cash disposed
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    8
    
    
    
    37(47
    )
    
    
    (27
    )
    
    
    11
    
    
    
    (73
    )
    
    
    (136
    )Financing activities from continuing operationsBank loans and advances
    
    
    
    
    
    
    5
    
    
    
    2
    
    
    
    
    
    
    
    7Change in revolving credit facilities
    
    
    103
    
    
    
    (52
    )
    
    
    62
    
    
    
    (13
    )
    
    
    100Increase in other long-term debt
    
    
    
    
    
    
    65
    
    
    
    (7
    )
    
    
    (58
    )
    
    
    Payments of other long-term debt
    
    
    
    
    
    
    (3
    )
    
    
    (5
    )
    
    
    
    
    
    
    (8
    )Net proceeds from issuances of common shares
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    1
    
    
    
    1Redemption of common shares
    
    
    (5
    )
    
    
    (40
    )
    
    
    (88
    )
    
    
    128
    
    
    
    (5
    )Dividends
    
    
    (16
    )
    
    
    (9
    )
    
    
    (5
    )
    
    
    14
    
    
    
    (16
    )83
    
    
    
    (35
    )
    
    
    (41
    )
    
    
    72
    
    
    
    79Change in cash and cash equivalents during the year from continuing
operations
    
    
    
    
    
    
    3
    
    
    
    32
    
    
    
    (3
    )
    
    
    32Change in cash and cash equivalents from discontinued operations,
including proceeds on disposal
    
    
    
    
    
    
    (29
    )
    
    
    (11
    )
    
    
    
    
    
    
    (40
    )Net change in cash and cash equivalents during the year
    
    
    
    
    
    
    (26
    )
    
    
    21
    
    
    
    (3
    )
    
    
    (8
    )Translation adjustments on cash and cash equivalents
    
    
    
    
    
    
    2
    
    
    
    (6
    )
    
    
    3
    
    
    
    (1
    )Cash and cash equivalentsBeginning of year
    
    
    
    
    
    
    31
    
    
    
    3
    
    
    
    
    
    
    
    34Cash and cash equivalentsEnd of year
    
    
    
    
    
    
    7
    
    
    
    18
    
    
    
    
    
    
    
    25
 62




---



##### 



2006Restated(Note 2c))Parent
    
    
    Subsidiary
    
    
    Non-guarantor
    
    
    EliminationCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    adjustments
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Operating activities from continuing operationsNet earnings (loss) for the year
    
    
    4
    
    
    
    (40
    )
    
    
    44
    
    
    
    (4
    )
    
    
    4Net earnings (loss) from discontinued operations
    
    
    (16
    )
    
    
    (18
    )
    
    
    2
    
    
    
    16
    
    
    
    (16
    )Net earnings (loss) from continuing operations
    
    
    20
    
    
    
    (22
    )
    
    
    42
    
    
    
    (20
    )
    
    
    20Adjustments forDepreciation and amortization
    
    
    
    
    
    
    139
    
    
    
    21
    
    
    
    
    
    
    
    160Losses (gains) on disposal and other
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )Impairment and other restructuring costs
    
    
    
    
    
    
    48
    
    
    
    7
    
    
    
    (5
    )
    
    
    50Unrealized loss (gain) on financial instruments
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )Future income taxes
    
    
    (3
    )
    
    
    (21
    )
    
    
    (4
    )
    
    
    
    
    
    
    (28
    )Share of results of significantly influenced companies and dilution gain
    
    
    (21
    )
    
    
    1
    
    
    
    
    
    
    
    12
    
    
    
    (8
    )Others
    
    
    20
    
    
    
    (35
    )
    
    
    (22
    )
    
    
    35
    
    
    
    (2
    )16
    
    
    
    101
    
    
    
    44
    
    
    
    22
    
    
    
    183Changes in non-cash working capital components
    
    
    75
    
    
    
    (48
    )
    
    
    (2
    )
    
    
    10
    
    
    
    3591
    
    
    
    53
    
    
    
    42
    
    
    
    32
    
    
    
    218Investing activities from continuing operationsPurchases of property, plant and equipment
    
    
    
    
    
    
    (95
    )
    
    
    (15
    )
    
    
    
    
    
    
    (110
    )Decrease (increase) in other assets
    
    
    (95
    )
    
    
    176
    
    
    
    (92
    )
    
    
    1
    
    
    
    (10
    )Cash of a joint venture and business acquisitions
    
    
    (561
    )
    
    
    (15
    )
    
    
    4
    
    
    
    
    
    
    
    (572
    )Business disposals, net of cash disposed
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8(656
    )
    
    
    74
    
    
    
    (103
    )
    
    
    1
    
    
    
    (684
    )Financing activities from continuing operationsBank loans and advances
    
    
    
    
    
    
    (4
    )
    
    
    (1
    )
    
    
    1
    
    
    
    (4
    )Change in revolving credit facilities
    
    
    340
    
    
    
    (55
    )
    
    
    (22
    )
    
    
    (77
    )
    
    
    186Increase in other long-term debt
    
    
    
    
    
    
    177
    
    
    
    
    
    
    
    (175
    )
    
    
    2Payments of other long-term debt
    
    
    
    
    
    
    (305
    )
    
    
    
    
    
    
    296
    
    
    
    (9
    )Net proceeds from issuances of common shares
    
    
    242
    
    
    
    106
    
    
    
    (14
    )
    
    
    (92
    )
    
    
    242Redemption of common shares
    
    
    (4
    )
    
    
    (75
    )
    
    
    75
    
    
    
    
    
    
    
    (4
    )Dividends
    
    
    (13
    )
    
    
    (1
    )
    
    
    (13
    )
    
    
    14
    
    
    
    (13
    )565
    
    
    
    (157
    )
    
    
    25
    
    
    
    (33
    )
    
    
    400Change in cash and cash equivalents during the year from continuing
operations
    
    
    
    
    
    
    (30
    )
    
    
    (36
    )
    
    
    
    
    
    
    (66
    )Change in cash and cash equivalents from discontinued operations,
including proceeds on disposal
    
    
    
    
    
    
    52
    
    
    
    4
    
    
    
    
    
    
    
    56Net change in cash and cash equivalents during the year
    
    
    
    
    
    
    22
    
    
    
    (32
    )
    
    
    
    
    
    
    (10
    )Translation adjustments on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Cash and cash equivalentsBeginning of year
    
    
    
    
    
    
    9
    
    
    
    34
    
    
    
    
    
    
    
    43Cash and cash equivalentsEnd of year
    
    
    
    
    
    
    31
    
    
    
    3
    
    
    
    
    
    
    
    34
 63




---



##### 



d)
    
    Summary of differences between Canadian and United States generally accepted accounting
principles relating to Subsidiary Guarantors
  2.1
    
    Reconciliation of Subsidiary Guarantors condensed consolidating net earnings (loss) for the
year ended December 31
 2007
    
    
    2006Restated
    
    
    RestatedNote

    
    
    2008

    
    
    (Note 2c))
    
    
    (Note 2c))Net earnings (loss) under Canadian GAAP
    
    
    
    
    
    
    (65
    )
    
    
    10
    
    
    
    (40
    )U.S. GAAP adjustments:Investment tax credit
    
    
    (b
    )
    
    
    (1
    )
    
    
    
    
    
    
    Gain realized on formation of Norampac
    
    
    (c
    )
    
    
    
    
    
    
    (4
    )
    
    
    (5
    )Change in fair value arising from foreign exchange forward contracts
    
    
    (d
    )
    
    
    
    
    
    
    
    
    
    
    (2
    )Change in fair value arising from commodity derivative financial instruments
    
    
    (d
    )
    
    
    1
    
    
    
    
    
    
    
    (3
    )Inventory costs
    
    
    (e
    )
    
    
    (1
    )
    
    
    6
    
    
    
    Employee future benefits
    
    
    (f
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (1
    )Excess of redemption price of Class B preferred shares on their paid-up capital
    
    
    (g
    )
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Tax effect on U.S. GAAP adjustments
    
    
    
    
    
    
    7
    
    
    
    (5
    )
    
    
    4Net earnings (loss) under U.S. GAAP
    
    
    
    
    
    
    (60
    )
    
    
    4
    
    
    
    (48
    )Net earnings (loss) under U.S. GAAP from continuing operations
    
    
    
    
    
    
    (58
    )
    
    
    19
    
    
    
    (30
    )Net earnings (loss) under U.S. GAAP from discontinued operations
    
    
    (p
    )
    
    
    (2
    )
    
    
    (15
    )
    
    
    (18
    )(60
    )
    
    
    4
    
    
    
    (48
    )
 64




---



##### 



2008RestatedNote
    
    
    
    
    
    
    (Note 2c))Canadian
    
    
    
    
    
    
    U.S.GAAP
    
    
    Adjusments
    
    
    GAAPCurrent assets
    
    
    (e)
    
    
    
    947
    
    
    
    
    
    
    
    947Property, plant and equipment
    
    (b) (c) and (g)
    
    
    
    1,711
    
    
    
    33
    
    
    
    1,744Intangible assets, other assets and goodwill
    
    
    (c)
    
    
    
    1,089
    
    
    
    (51
    )
    
    
    1,038Total assets
    
    
    
    
    
    
    3,747
    
    
    
    (18
    )
    
    
    3,729Current liabilities
    
    
    
    
    
    
    557
    
    
    
    
    
    
    
    557Long-term debt
    
    
    
    
    
    
    1,799
    
    
    
    
    
    
    
    1,799Other liabilities
    
    (b) to (e) (g) and (o)
    
    
    
    263
    
    
    
    (9
    )
    
    
    254Total liabilities
    
    
    
    
    
    
    2,619
    
    
    
    (9
    )
    
    
    2,610Shareholders equity
    
    (b) to (e) (g) and (o)
    
    
    
    1,128
    
    
    
    (9
    )
    
    
    1,1192007RestatedNote
    
    
    
    
    
    
    
    
    
    
    (Note 2c))Canadian
    
    
    
    
    
    
    U.S.GAAP
    
    
    Adjustments
    
    
    GAAPCurrent assets
    
    
    (e)
    
    
    
    936
    
    
    
    (1
    )
    
    
    935Property, plant and equipment
    
    (b) (c) and (g)
    
    
    
    1,647
    
    
    
    39
    
    
    
    1,686Intangible assets, other assets and goodwill
    
    
    (c)
    
    
    
    1,307
    
    
    
    (11
    )
    
    
    1,296Total assets
    
    
    
    
    
    
    3,890
    
    
    
    27
    
    
    
    3,917Current liabilities
    
    
    
    
    
    
    458
    
    
    
    
    
    
    
    458Long-term debt
    
    
    
    
    
    
    1,976
    
    
    
    
    
    
    
    1,976Other liabilities
    
    (b) to (e) (g) and (o)
    
    
    
    259
    
    
    
    31
    
    
    
    290Total liabilities
    
    
    
    
    
    
    2,693
    
    
    
    31
    
    
    
    2,724Shareholders equity
    
    (b) to (e) (g) and (o)
    
    
    
    1,197
    
    
    
    (4
    )
    
    
    1,1932.4  Reconciliation of Subsidiary Guarantors condensed consolidation statement of earnings for
the year ended December 31Note
    
    
    
    
    
    
    
    
    
    
    2008Canadian GAAP
    
    
    Adjusments
    
    
    U.S. GAAPSales
    
    
    
    
    
    
    3,166
    
    
    
    
    
    
    
    3,166Costs of sales and expenses
    
    (b) (e) and (l)
    
    
    
    3,146
    
    
    
    7
    
    
    
    3,153Operating income from continuing operations
    
    
    
    
    
    
    20
    
    
    
    (7
    )
    
    
    13Interest expense
    
    
    
    
    
    
    132
    
    
    
    
    
    
    
    132(112
    )
    
    
    (7
    )
    
    
    (119
    )Provision for income tax
    
    
    (b), (l)
    
    
    
    (29
    )
    
    
    (12
    )
    
    
    (41
    )Share of results of significant influence companies
    
    
    (p)
    
    
    
    
    
    
    
    (20
    )
    
    
    (20
    )Net earnings from discontinued operations
    
    
    (p)
    
    
    
    (18
    )
    
    
    20
    
    
    
    2Net Loss attributable to Cascades inc.
    
    
    
    
    
    
    (65
    )
    
    
    5
    
    
    
    (60
    )
 65




---



##### 



2007
    
    
    
    
    
    
    2006Restated
    
    
    
    
    
    
    RestatedNote
    
    
    
    
    
    
    (Note 2c))
    
    
    
    
    
    
    (Note 2c))Canadian
    
    
    
    
    
    
    U.S.
    
    
    Canadian
    
    
    
    
    
    
    U.S.GAAP
    
    
    Adjusments
    
    
    GAAP
    
    
    GAAP
    
    
    Adjusments
    
    
    GAAPSales
    
    
    
    
    
    
    3,127
    
    
    
    
    
    
    
    3,127
    
    
    
    2,597
    
    
    
    
    
    
    
    2,597Costs of sales and expenses
    
    (b) (e) and (l)
    
    
    
    3,038
    
    
    
    18
    
    
    
    3,056
    
    
    
    2,514
    
    
    
    13
    
    
    
    2,527Operating income from continuing operations
    
    
    
    
    
    
    89
    
    
    
    (18
    )
    
    
    71
    
    
    
    83
    
    
    
    (13
    )
    
    
    70Interest expense
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    135
    
    
    
    100
    
    
    
    
    
    
    
    100(46
    )
    
    
    (18
    )
    
    
    (64
    )
    
    
    (17
    )
    
    
    (13
    )
    
    
    (30
    )Provision for income tax
    
    
    (b), (l)
    
    
    
    (13
    )
    
    
    (12
    )
    
    
    (25
    )
    
    
    4
    
    
    
    (5
    )
    
    
    (1
    )Share of results of significant influence companies
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )
    
    
    1
    
    
    
    
    
    
    
    1Discontinued Operations
    
    
    (p)
    
    
    
    15
    
    
    
    
    
    
    
    15
    
    
    
    18
    
    
    
    
    
    
    
    18Net Loss attributable to Cascades inc.
    
    
    
    
    
    
    10
    
    
    
    (6
    )
    
    
    4
    
    
    
    (40
    )
    
    
    (8
    )
    
    
    (48
    )
 66